CHAMBER NEWS Gordon Brown
gives his thoughts on the future of the economy
Gordon Brown knows a thing or two about leading the country during an economic crisis, having been Prime
Minister during the 2008/09 recession. As the country grapples with a potentially far bigger depression, he
spoke to British Chambers of Commerce director-general Dr Adam Marshall in a discussion about a global approach to
rebuilding a stronger economy during a webinar. Dan Robinson picks out his key messages.
Lessons learned from global economic crisis could help stave off insolvency crisis First, you have to get straight to the root of the problem and then address it with unremitting energy and maximum force. Secondly, leadership always has to be not one, but two steps ahead of the curve. I want us to act before the
moment where for many businesses, the liquidity crisis of 2020 becomes the insolvency crisis of 2021. When unable – because of
shutdowns – to get revenues back to pre-crisis levels, as well as being hit by cashflow problems, loans having to be repaid and without the funds to invest in much-needed upgrading, we’ll see good, viable and often highly-advanced tech firms pushed into administration by the banks – the dreams of entrepreneurs killed off. And not only do good firms go
to the wall, but our economy loses capacity, loses skills and loses out on long-term growth. We’ll enter a vicious cycle of what I'd call uncreative destruction, with higher unemployment killing off demand and the lack of demand causing further unemployment.
Equity for loans initiatives could help businesses survive I look at countries like France, Germany, Sweden, Singapore, Ireland and New Zealand, where
‘It will only be through getting back to far higher levels of growth that we can bring employment back’
equity for loans initiatives are being put in place now to help both strategically important firms and also start-up and growth companies. I’d ask the Government to
support the Growth Fund and the Future Fund so they can create regional hubs and offer companies – which can prove they are viable in the long term and will contribute massively to the British economy – the chance for the public and private sector to jointly take small equity shares in these businesses in lieu of loan repayments. That would be a way of injecting
capital into the business sector and building for the future, particularly in good companies that have real prospects but just can’t get back to 100% activity quickly. For let us be clear, it will only be through getting back to far higher levels of growth that we can bring employment back, expand the consumer economy, reduce the deficit and debt – and, as importantly, bring back optimism and hope.
Better global co-operation needed We found in 2009 that fiscal and monetary co-operation was twice as effective when it was done together than it would have been if
we'd done it simply on their own. In the recovery phase, if you have that fiscal co-ordination then trade can expand, growth can expand and, as a result of that, employment will expand. The vaccine nationalism we’ve
seen, when one country as trying to get all the benefits of the vaccine and America pulled out of the WHO, was incredibly unfortunate. I hope we learn from this crisis and we find a way of co-operating when we have a global virus, a global recession and a global solution that has to be found.
Better youth employment programme needed From my own experience with the New Deal for Young People in 1997 and the Futures Jobs Programme in 2009, there’s four themes you need: work experience, training, help in the job search and giving employers incentives to take young people on. We can’t afford to have a million
young people doing nothing, which I fear will become a social and mental health problem, as well as an unemployment problem. In our Future Jobs Programme, the average cost was about £3,000 per young people and that’s a relatively small cost to get a large number of
young people back into work when you take everything else into account, including unemployment benefits.
Closing productivity gap with countries like Germany My friend Lord Sainsbury, the University of Cambridge chancellor, has written a book called Windows of Opportunity: How Nations Create Wealth, which gives the best insight as he breaks it down to a sector level. At the peak of North Sea oil, the
productivity per worker was something like £500 per hour because it’s a very capital-intensive industry that needs fewer workers. Manufacturing, on the other hand, was only £50 per hour and the job- intensive service sectors were £25 per hour. There’s a problem in the British
economy where we haven’t been able to create as many advanced manufacturing opportunities and, therefore, our productivity levels are lower than countries like Germany. We need to grow, and growth requires productivity, so now is the right time to look at sector-by-sector improvements we can make – and I think chambers of commerce could lead this debate.
Gordon Brown was the latest guest in BCC’s Leadership Programme. To watch the debate, visit
bit.ly/2UOQfr6
business network December 2020/January 2021 39
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