CBI: 50 YEARS OF BUSINESS INNOVATION | BRITAIN AND BEYOND


more efficient by outsourcing production and back-office processes, such as web design and call centres overseas. As many low-skilled manufacturing activities headed east, the UK saw its import bill go up and its trade deficit worsen. The loss of jobs to Asia also led to hostility, although rising employment showed that firms were creating new jobs to offset those lost.


MONEY FLOWS As well as opening up product markets and creating a global supply chain, globalisation has also enabled money to move more easily across borders. Britain has been a key player in world investment markets. In the 10 years to 2011, the UK was the third-largest recipient of foreign direct investment (FDI) inflows in the world after the US and China, and the largest in the EU, according to the World Bank. Over the same period, the UK was also a prolific source of FDI abroad, having the third-largest net outward flows in the OECD. A sequence of well-known businesses such as Pilkington Glass, ICI and Cadbury have been taken over by foreign companies with little popular or political opposition – until the


Opposite: UK firms are increasingly outsourcing back-office processes to the Far East


2014 proposed takeover of AstraZeneca by Pfizer of the US. BMW’s takeover of the Mini car company is an example of a deal that people recognise as leading to a better product while preserving an iconic British brand. While there are legitimate concerns over the taxation of foreign-owned companies, Britain has – by and large – benefited from foreign investment in terms of wealth and jobs. Over the last three decades the UK has clearly


favoured free trade and openness, where other developed countries have resorted to protectionism in defence of their domestic markets. For instance, the French government blocked Pepsi from acquiring Danone in 2005, declaring the yoghurt maker a “strategic industry”; the United States has acted to protect companies from Chinese takeovers; while Italy’s government has taken a protectionist stance when it comes to national companies such as Alitalia and Parmalat being taken over by foreign entities.


ASIA PIVOT As well as being open to global capital flows, the UK has also welcomed international labour: 14 per cent of workers in 2012 were born outside Britain, and this share has been growing. In 2004 the UK gave the freedom to move to eight new


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countries joining the EU, primarily from eastern Europe. This led to substantial immigration over the following decade and has fuelled demands by voters for caps on migration. However, it is notable that the number of European migrants in the UK is almost exactly equal to the number of Britons living in other EU states. More recently the government has realised


that the next phase of globalisation should be closer engagement with the BRICS economies – Brazil, Russia, India, China and South Africa – and other fast-growing emerging economies. While UK goods exports to the BRICS have risen in recent years they only made up 5 per cent of all exports by 2011. In a 2013 report, The Only Way is Exports, the CBI warned that, at the current rate of growth, exports to the BRICS would not make up the majority of the UK total until around 2047. An embrace of “openness” – to trade and


people, to investment and ideas from abroad – has been the foundation of Britain’s success. There is no reason to suppose that the UK cannot continue to thrive and prosper if it embraces and harnesses the forces reshaping the global economy, using its influence and skills to further develop the interdependent relationships that help to guide global practices and bring down barriers to trade in the modern economy.


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