Director’s update: Globalised Economy

As 2022 draws to a close it is a good time to reflect on the year gone by and look to 2023.  Internationally, this year has been defined by the terrible war in Ukraine and the fall out for global energy, food and supply chains.  It has impacted progression on the green transition, has stimulated further conversations about China dependency whilst enabling a fresh round of protectionism.

For the UK, politics have ruled the day.  The free trade agreement agenda has rightly slowed with the Northern Ireland Protocol and Conservative Party infighting complicating already complex negotiations.  The Global Britain agenda equally has stalled, both in the implementation of the Integrated Review and for the UK showing leadership on the global stage post the G7 and COP26.  In 2023 the government will require greater clarity and conviction in it’s international strategy if the UK is to remain competitive and business must be a major part of that success.

So to 2023.

Stagflation, Growth and Trade

With the UK in stagflation the CBI are pressing the government to focus on growth and business investment. At our Annual Conference we highlighted four key areas with trade front and centre. As UK domestic consumption is struggling now is the time for business to seek new revenue from overseas markets and for the government to do all it can to support market access (that includes to the EU!).  FTA utilisation, greater support for services trade, through unlocking non tariff barriers, and promoting UK green expertise will all feature in 2023. 

Partnership and protectionism

11.6% of imports amongst the G20 are subject to trade barriers erected since 2009 with 47 new measures introduced between May and October 2022 affecting over $160bn of trade.  In the current geopolitical climate this is only going to get worse.  It also does not account for the distorting effect of increasing state aid, led by the incoming US Inflation Reduction Act.  With free trade under threat the UK must get to grips with how it remains competitive.  It must have the right incentives in place to attract investment.  It must also build new partnerships for UK exports (see above) as well as in sourcing for greater resilience.

Economic resilience and the industries of tomorrow

Multilateralism in 2023 will major on economic resilience and reducing inequality.  Japan’s G7 will be framed by China challenges whilst India will use the G20 to show global leadership and speak louder for the global south.  This is all in the context of two drivers of economic growth – the green transition and future tech.  Neither can be delivered by a single nation alone.  Both will need partnerships, involve complicated supply chains with increasing amounts of critical minerals and need a skilled workforce.  The UK must use the Integrated Review refresh to agree where it sits in the value chains of these industries, what we will seek to own, collaborate on or have access to and then work with industry to deliver that effective economic strategy.

China and election season.

The elephant in the room is a what will happen with China in 2023 as it’s Covid policy takes a dramatic shift.  G20 Bali felt like a watershed moment, reducing tensions with China and the Sunak government is certainly taking a different tone.  With elections in 2024 for the UK, US and India (amongst others), handling the China dilemma and refraining from nationalism amidst recession and inflation is going to be a key challenge.  The UK must seek not be an outlier with it’s China policy and must balance the desire to address immediate public concerns for political gains with the need to look longer term to ensure UK security, influence and prosperity.

And for CBI International     

Working with Government to deliver the challenges above will be our priority.  Stimulating trade and exports, ensuring industry is at the heart of delivering the UK’s global strategy and helping members mitigate risks, particularly in supply chains.  These elements will also be prominent in CBI’s new Fit To Grow project, led by Hannah Grummett, which will support members to act and make themselves more resilient and ‘fit to grow’ in turbulent economic & political times.

All of this reflects just a snippet of the areas we have worked with CBI members on this year and I’d like to take the opportunity to thank for your insights and support.  For those who would like to be involved further in 2023 do get in touch with me and the International team.  Hope you all have a restful and happy festive season.