A new era for business - CBI
The next year won’t be easy, but will be a definite improvement on the last one, so long as companies think differently, work collaboratively and expand. Rhian Chilcott at CBI Washington explains how the British-American relationship provides a foundation for growth
Writing a foreword to the 2010 edition of British American Business is a much nicer experience than writing the 2009 foreword was. In early 2009, both the British and US economies were in the grips of a global downturn. One year on, both countries have, thankfully, emerged from that recession. Confidence is still very shaky and recovery is muted – but the trend is, as the economic pundits like to say, “directionally correct”.
The CBI is currently forecasting that UK GDP will grow by 1% in 2010 and 2.5% in 2011. Those may not sound like terribly impressive figures from CBI , but remind yourself where we’ve been: in the 24 months to Q4 2009, the UK economy shrank by 6.2%. That’s a little bit worse than the recession of the 1980s, when there was a peak-to-trough decline of 6%.
So CBI believes growth, even though it is below the recent trend growth rate for the UK, is to be welcomed. It will come from a variety of causes – some improvement in consumer demand next year, for example, and stronger growth in UK exports driven by more robust global demand. The relative weakness of sterling will help the UK to export to key markets, including the US. The pound has fallen nearly 30% against the dollar since its peak in 2007. For US companies, the UK is now more attractive than ever as a place to invest.
At CBI we see we are not out of the woods yet. Fortunately, the global economy did not fall into a protectionist trap as it did in the Great Depression: we didn’t see a wave of new tariff barriers akin to the infamous Smoot-Hawley Act of 1930. But it’s important that we keep on repeating the importance of free and open trade and investment to the world economic recovery.
Particularly in the investment space, it is quite possible that the pressure to discriminate against “foreigners” will actually get greater as the recovery picks up pace. For the last two years, countries have been desperate for capital, almost regardless of where it came from. Now, as credit conditions improve somewhat, will governments start to get picky again about who’s investing where? Happily, the UK has always welcomed US investment, and vice versa. CBI believes we need to ensure that stays the case. The business community on both sides of the Atlantic also needs to deal with a new political reality in the post-crisis world. Seldom has trust in markets, in companies and in management in particular been so low.
As the CBI Director General, Richard Lambert, said in a recent lecture: “The risk is now that the public and political response to what’s happened will itself have troubling consequences. If you don’t trust an institution to behave well, you impose regulations – perhaps to a point that undermines the dynamic workings of a market economy, and in turn holds back the forces of job creation and sustainable economic development.”
Richard ( CBI ) went on to talk about the ways in which CBI members have told us they expect life to be different in the future – things like CBI members building up their collaboration with higher education institutions, looking to support companies within their own supply chains, finding alternatives to traditional trade credit insurance. All of which play well into the UK/US relationship: we have strong established links, based on common values, which can serve as a foundation for the growth to come.
The new era for business will be characterised by less risk-taking than the previous decade – and in terms of geopolitical relationships,as far as CBI can see the British-American friendship is one of the least risky out there!
In short, the next year is not going to be an easy one, but it’ll be an improvement on last year. There will be both economic and political headwinds to survive, and companies will have to confront them both.
To do so, they will have to think differently, work collaboratively, innovate and expand. All of which, I’m pleased to say, can happen easily in the context of UK/US trade and investment.
Rhian Chilcott, CBI
Rhian Chilcott is head of the CBI’s Washington Office.
Contact her at: rhian.chilcott@cbi.org.uk
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