Speaker: Sir Vince Cable
Important note: These are the author's personal recollections and interpretations, which are likely to suffer from errors and selectivity. There is no endorsement from the IET or Sir Vince Cable.
Over 400 people packed the main Kelvin Lecture Theatre for this stimulating talk by the well known former LibDem MP, Sir Vince Cable.
Ten months on from the momentous referendum result, whatever our individual preference, BREXIT is something we have to get on with making happen, even if the process and outcome are clouded by uncertainty. We now have a timetable to exit by March 2019; allowing six months for parliamentary and European ratification, this probably leaves eighteen months to sort it all out.
Vince took us through five key aspects of this tough challenge:
1. Money:
- More realism and flexibility is emerging on how much is owed by the UK - some form of transitional agreement is likely.
- A Customs Union is very important for smooth production as our manufacturing supply chains are very complex and cross borders.
- Single market and the four Freedoms - now totemic (a British idea, originally) and a statement of principle.
- Regulatory convergence and harmonisation cut barriers to trade - can we just accept all the existing regs?
- 'Crashing out' and relying on the WTO if no agreement is reached, would be disastrous
- There are lots of complications, such as: Gibraltar, Irish border, Scotland and its independence.
2. Economic impact:
- Original assessments were mainly negative, likely to lead to a recession. This has not yet materialised.
- Economy hasn't tanked. The global economy has been doing well and the UK has been fuelled by a consumer boom, with confidence still high.
- The largest factor has been Sterling depreciation, a 15% fall.
3. People:
- Legacy issues - the right of EU nationals to remain in UK and the rights of Brits abroad.
- Free movement - will there need to be a compromise, something transitional? The current state is untenable; Government will need to show that immigration is controlled.
- What number can come in? There is a need for the economy. Perhaps more or fewer could suit local variations.
- Immigration is likely to be tied up with trade deals: e g. India proposed more trade for more visas.
- UK training deficit has meant that we need people from abroad. The apprenticeships initiative is good, but has been slow to take off; we need to value technical vocational training; whole of life (Adult) education is very poor.
4. Research funding:
- Broadly true that UK is good at science, but not at innovation; we have low productivity.
- The previous parliament had started new ideas to help, such as "Catapults" and tax credits.
- There is now uncertainty over EU funded research which is affecting current / new projects.
- Getting funding for innovation is difficult - the'valley of death'. We have very low R&D spending in UK (not helped by the big banks).
5. UK Innovation deficit and economic strength:
- We're not as strong as we think we are.
- Growth has shifted from the developed economies to the emerging economies incl. China and Africa.
- To put it into perspective, recent charts of economic size show UK about 6th. Using a measure of purchasing power, China is 1st, followed by USA and India with UK 9th, below Malaysia.
In summary, there will be opportunities for UK innovation and growth but, like any divorce, it is likely to be expensive.
Vince's forthright and insightful views on this topical and divisive subject inspired many questions from the fully-engaged audience:
- Is necessity the mother of invention? VC: a nice idea if we were able to rise to the challenge. Realism suggests not.
- Banks: Will they survive? VC: They were the largest in the world but two failed and Barclays is under investigation. They are now safer by holding more capital, but they are not lending. Now there are encouraging inroads from FinTech, challenger banks and other sources of investment.
- As we only see things in hindsight, when will we see negative impacts, if ever? VC: Only the exchange rate has helped so far - it could be a big shock. We may end up de facto in the Single Market, with little real impact or change.
- Galileo Project: Will cross national research collapse? VC: Maybe by accident, if there is no agreement. UK has to pay a price for leaving, but hopefully not too vindictive.
- UK productivity problem: Will BREXIT help? VC: Our employment is high, but we're not very productive. This is because of Iow levels of investment ~ 5%, a lack of skills and a Iack of successful innovation. It will be a long haul.
- How to keep people in Engineering? VC: Financial sector is too big and global: not focused on British industry. Pays too much. Could be a good thing if it contracted slightly.
- Might UK become a tax haven? VC: We already are to some extent with our low corporation tax: "Lichenstein on Thames"? Likely to be an empty threat, that has annoyed a lot of Europe. We're not in or economic position to slash tax rates.
- How many people actually understood all the issues? VC: It is agreed now that a referendum is appropriate for major constitutional changes. Many voted against their own best interests, being disillusioned and saying "to hell with it"; it gave the establishment a kicking.
- After Kraft Cadbury deal: Should there be a public interest test? VC: Take-overs are too permissive; need to be more restrictive. Currently only for defence, media or banking. ARM should not have been allowed to be sold to Softbank. Exchange rate has made UK companies attractive.
- Does Britain have the faith and mission to succeed? VC: Hopes so; approach in a positive way. Not a war situation. Will be a mire of grubby details and not very exciting.
Thanks go to Sir Vince for giving us his time and his insights. Also to the Central London IET volunteers and to our Chair, Dimitris Loumanis for organising, introducing and closing the evening.
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