FEATURE STRAP GLOBAL BRITAIN? WHAT NEXT FOR
Our ability to compete on the world stage is being tested by a complex set of influences, from Trump to the tech giants. But investing in innovation and supporting regional growth can help the UK to thrive, writes the IoD’s senior economist, Tej Parikh
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he global economic order is in a state of flux. The US, long the de facto custodian of international economic norms, is retreating from this role under Donald Trump’s “America first” doctrine. China, now the world’s second- largest economy, is staking a huge claim on future trade flows with its ambitious Belt and Road Initiative (BRI). And, as the EU continues to grapple with questions about its economic and political integration, a wave of populism is sweeping through many emerging markets. Meanwhile, the rapid rate of technological innovation is disrupting social dynamics, industrial relations and diplomacy the world over. This complex and uncertain situation is the manifestation of two seismic international socioeconomic trends. First, globalisation, the powerhouse of growth across both the developed and developing worlds for the past three decades, is running out of steam. Second, the dominant model of western liberal democracy, which has been entrenched since the end of the second world war, is being challenged. Indeed, the world’s centre of economic gravity is shifting eastward and the implications for “Global Britain” and its businesses, as they seek to capitalise on new opportunities and mitigate new risks while operating outside the EU, are profound.
THE DRIVERS OF CHANGE Globalisation has created both winners and losers. Urban hubs that have been able to benefit from the emergence of international markets have prospered, while industrial
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regions have faced competition from global supply chains. Discontent among the latter group has fuelled the emergence of parties that speak the language of protectionism and nationalism. At the same time, the march of new technology and the global Faangs (Facebook, Apple, Amazon, Netflix and Google) has given rise to cross-border regulatory challenges and national security concerns. Furthermore, there’s a growing emphasis on services, which are harder to trade than goods; international bank lending has still yet to recover fully from the 2007-08 credit crunch; and multinationals are finding it increasingly hard to manage their expansive business models. All of these forces are challenging globalisation. Meanwhile, the shift in economic power away from the West has perhaps been inevitable. Along with rapid population growth, the emerging middle class in Asia (especially China and India) and Africa is driving wealth creation and unleashing the potential of developing markets. Indeed, China is transforming itself from the workshop of the world into a global
Game of risk: UK plc must contend with factors including (from bottom) disruptive hi-tech innovation, US protectionism, the rise of populism, China’s increasing socioeconomic clout and the declining influence of western liberal democracy
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