THE GLOBAL ECONOMY | IN FOCUS
BRITAIN’S GLOBAL FUTURE THE GLOBAL ECONOMY
Britain has looked to the rest of the world for centuries, but the patterns of trade, migration and investment have constantly changed. An open economy has long been – and must continue to be – a crucial part of the British success story.
Britain has always been a globalised and globalising nation. For centuries it has reached across the seas to find trading partners while at the same time being open to an influx of goods, services, money, people and ideas from overseas. The UK has benefited from this two-way flow, yet globalisation has often been a controversial and divisive issue. When the CBI was set up, the UK was
looking to find a new role in the global economy. The Second World War had brought to an end Britain’s era as the centre of a global empire based on industrial domination and naval power. It now looked to build strong trading links with the Commonwealth countries while also seeking out closer integration with the European Common Market – something that would not happen until 1973. With the domestic economy stuttering, the newly formed CBI was fully aware that British
Opposite: Globalisation has opened markets, created supply chains and enabled money to move more easily. Right: The leaders of the five BRICS economies meet
business needed to take advantage of global opportunities. As CBI president Maurice Laing wrote in the 1965 annual report: “The whole future of Britain rests upon the success of industry, commerce and agriculture and especially on the exporting firms which provide the wherewithal by which we all live.” Global trade volumes had been rising
steadily since 1947 when the major trading nations abandoned the protectionism of the pre-war years and signed the General Agreement on Tariffs and Trade (GATT), the precursor to the World Trade Organisation (WTO). Membership of the European Union became the centrepiece of Britain’s global trade policy, as it looked to secure openness by embracing multilateralism and taking an active role in the setting of international trade rules. Entry into the EEC and the emerging trend of globalisation saw the ratio of the sum of UK exports and imports to GDP hit 50 per cent in 1974 for the first time.
THE “FLAT WORLD” ECONOMY Meanwhile the decisions by the incoming Thatcher government in 1979 to abolish exchange controls and later, in 1986, to deregulate the financial services industry opened up Britain to foreign capital. Even more significant would be the changes that happened three years later. The fall of the Soviet Union in 1989 opened up
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a large area of the world to trade and investment for the first time in more than 70 years. As CBI president Sir Trevor Holdsworth noted at the end of that year: “It is becoming clear that private enterprise will hold centre stage in this process. Cordial relations established by the CBI should provide British business with a sound foundation on which to build.” The telecommunications revolution and
the admission of China into the WTO in 2001 combined to open up Asia as a source of low-cost manufacturing and back-office IT. The phenomenon became known as the “flat world” after the bestselling book by Thomas Friedman. It enabled UK companies to become »
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