Wednesday 08 July 2020

Ten steps that can transform British economy

In this radically thinking article Alexander Temerko outlines ten steps that can transform British economy, making it more attractive for investors. These steps would truly archive a deal worth of Roosevelt – by creating a global economic partnership between the financial sector, business and the Government. 

We are undoubtedly living in a time of great crisis. It is very likely to result in permanent change, but within this rare opportunities can be found. Far less frequently than once in a generation are we afforded such a chance to substantively rewire our economy, our society, and our lives. This moment is firmly in the hands of Boris Johnson; he has the benefit of an unexpected landslide majority – a mandate for sweeping change at a time that allows for it.

With his election victory comes the curse of high expectations. People want to see change. London to the industrial North the last election, and Brexit before it, sent a clear message that things should not continue as they are. The paradox, of course, is that to achieve significant change, the Government needs to do something revolutionary, and it must be brought about by a radical shift in economic policy.

To meet the expectations of many the government will need concrete, innovative, and indeed revolutionary new ideas and policies. That is why I am proposing a new economic policy consisting of ten steps to deliver significant, revolutionary change to our economy and society.

1. A second branch to the NHS: The PHS

We must start from our biggest expense, and leverage our world leading NHS into a driver of growth. The National Health Service is need of reform; the dual problems of declining quality of care and increasing waiting times combine to create an NHS that burns through an enormous percent of our budget, without always delivering consistent top-quality care. The solution is to create an ancillary branch of the NHS – the Private Health Service, or PHS.

This second leg of the NHS would be for-profit, and would include new-built hospitals and medical centres that would run side-by-side with the NHS. Such a PHS would accomplish several major goals:

  • It would attract medical tourism from around the world. Instead of losing enormous amounts of money to Germany, Switzerland, Israel and other medical tourism destinations, instead we would see well-off Britons turning to the PHS, and reinvesting their money in the UK’s medical system. Foreign citizens could also access this PHS, with the result that the UK would become a medical tourism hotspot, with all of the dynamic innovation and research that this brings.
  • Simultaneously, this would take pressure off the NHS, and waiting times and quality of care would increase commensurately. The NHS would remain free at the point of use for all who need it, while also benefitting from increased budgets and a reduced caseload due to the PHS running simultaneously.
  • The potential windfall from such a system would run into the tens of billions of pounds, and would create thousands of jobs, all while improving medical science and research.

With all the money raised reinvested in NHS services, it would lead to increased budgets across the board, and better outcomes for all.

2. Go big on green water infrastructure

Infrastructure needs to be significantly expanded. A massive series of water-based green infrastructure projects – the creation of systems of canals and lakes, connecting economic hotspots in Britain, is long overdue. There would be a wide range of benefits, in addition to creating thousands of jobs in design, engineering and the constructing of canals, dams, and reservoirs. If done properly the environmental impact would be hugely beneficial. An expanded series of reservoirs and canals would prevent both floods and droughts, aid in agricultural efficiency and output capability, as well as improving transport infrastructure.

Furthermore, better environmental protections of forests and green spaces, as well as increased biodiversity, would create a healthier countryside.

This is a simple and cost-effective long-term investment: the money spent yearly on flood and drought prevention and mitigation alone would cover the cost of many green waterway projects.

3. Take the lead in North Sea oil decommissioning

Decommissioning aging energy infrastructure in the North Sea is a market projected to be worth £15.3 billion over the next decade. The potential opportunities that will arise from the development of a world-leading domestic decommissioning industry are vast. However, we will not be able to deliver a well-functioning industry whilst operators remain siloed when it comes to the operating model they intend to deploy or the network of contractual relationships they wish to pursue.

The Government should take the lead in encouraging industry standardisation, which will be necessary to give certainty and clarity on the expectations of the decommissioning supply chain. Without this support and appropriate regulation, a world-leading export opportunity in decommissioning could be lost to other nations.

4. Build more interconnectors

The supply of electricity between the UK and continental Europe via interconnectors has been an incredible success story. It allows for efficient market coupling and the reduction in electricity price peaks and troughs caused by demand and weather-dependent supply.

Building between five and seven further interconnectors would help secure a 1 per cent  reduction in the price of electricity, delivering significant savings for the British consumer. Additional interconnectors would also improve energy independence and security. Access to electricity from other markets is essential to balance the grid as intermittent renewables continue to come online.  

5. Make lending easier

We should streamline regulations to release funding and bring forward investment. Our banking and industry systems seem to exist in parallel universes. Banking restrictions and regulations have virtually paralysed direct lending. The only types of private lending that still operate at real scale are mortgage lending and bank lending to traders. The Government should adopt a new regulatory framework for bank lending to export-oriented businesses and the service industry as soon as possible. The same should be done to support apprenticeship schemes. 

Finance is the life-blood of the economy. Lending needs to be revived by making it worthwhile both for banks and for borrowers. Lead-times of years are unacceptable and holding back our economy. A strict regulatory regime to accelerate the approving of funding and slash regulation so that wait times are between six months and one year would unlock a huge amount of investment in the UK. A wide range of regulations should be simplified or removed. Revision to employment legislation should involve changes to immigration law, with all those workers who are able to contribute to an export economy made welcome. We need more highly qualified engineers, scientists, and highprecision/hazardous production industry workers (e.g. certified senior-level welders).

Competition is as essential in the labour market as it is in any marketplace.

6. Build three cities full of new homes

Estimates show the UK has built around 3 million too few homes over the past 30 years, leading to significant financial barriers to home ownership for our younger generation. As homeowners tend to vote Conservative, whilst a nation of renters will vote Labour, the Government continues to expose itself to electoral risk by failing to address the ongoing crisis. Radical reform is needed, not only to bring down the cost of ownership, but also to increase employment opportunities in construction and support the development of a thriving supply chain.

There are many thousands of jobs that could be created providing the auxiliary services such as the piping and cables needed in new housing developments. As it stands, we need 10 million affordable houses. Preventing us from quickly building such houses are three problems: Land, procurement, and electricity. For 10 million houses, we would need an additional 5 gigawatts of electricity. In addition, enormous amounts of materials would be required by contractors, and wide tracts of land would need to be made available for construction. To create the infrastructure to expand existing cities such as London, Manchester, Birmingham, and Newcastle to compensate this number of new houses would be nigh on impossible, logistically, and due to planning constraints.

The solution is the creation of three ‘new cities’, just as the Government did after the Second World War, to provide land, electricity, and a simple allocation of materials to a designated area. These three ‘new cities’ could be centred around new universities – two medical, and one industrial, which would be a focal point for providing homes, jobs, and a community.

7. Create a new, world-beating London airport

Airports are a key piece infrastructure for any modern globalised economy. Businesses rely on global connectivity and increasing the capacity of regional hubs would serve to boost productivity between markets and cities as well as employing thousands of people during the course of construction. However, we should also create one new, world-beating airport in the vicinity of London, to take pressure off of aging airports like Gatwick and parts of Heathrow.

This new airport, connected via high-speed-rail as per the Prime Minister’s plan when he was the Mayor of London, would dramatically improve infrastructure and transport in and around the capital, and would free up transport links in the rest of the country.

8. Simplify the relationship between banks and business

Money is the lifeblood of business, but banks today are not only financial institutions. They are an arm of the tax authorities, they undertake anti-money-laundering and corruption work, in many ways they act as an extension of the state. Such activities are necessary, but they are more properly the responsibility of a financial regulatory police force. The banks should be returned to being financial institutions, that promote lending, security and creation of business.

Banks should be uncomplicated institutions focused on providing the necessary capital to support British businesses; their primary capability is weakened by the burden of secondary responsibilities better carried out by the police, auditors and other authorities. We should therefore create a new authority, with both police and regulatory powers – a sort of Financial Enforcement Authority – to relieve the pressure on banks.

9. A new national export fund

We should set up a national export support fund, to the tune of 10 per cent of GDP over four years, giving major support to competitive goods and services.

We would need to identify 20 key areas of export potential through establishing joint ventures with world leaders in high-tech, aerospace, textiles, banking and financial services, pharmacology, pharmaceuticals, education, port and warehousing services, equipment manufacturing (fabrication and assembly), and global telecommunications traffic management services. Additional attention should be given to the defence industry’s export capacity.

10. Form business councils

The relationship between government and business needs to change. The civil service too often frustrates business aims. Business councils in every department could guide Government as it develops and implements policy. These business councils could be rotational, with a membership based on the challenges necessary at any given time. Participants would need to be active businesspeople, from every level of the business community.

These ten steps touch all areas of the UK economy, and they are radical. They are also necessary to deliver real improvement and growth. They speak as well to a societal change, shifting the entire nation towards a new dynamism and a willingness to engage in national-scale projects. The resultant economic shifts would have societal benefit, as well. They would provide a clear vision for the future of the UK and foster hope for a different and better future.

We have been afforded this once-in-a-lifetime opportunity to radically restructure our nation. This is a change to recapture the innovative, world-leading economy that we have been in the past. The government has spent a huge amount attempting to mitigate the coronavirus crisis – we must now capitalise on the opportunity this time of change affords us. An economic revival is not simply ideal; it is vital.

Our opportunity is now, but if we fail to seize the moment, we may never get such a chance again.


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