Director’s update: Globalised Economy
Your July update on the latest international developments.
Much like you all, I've been closely tracking the leadership contest, reading the tea leaves and debating with members and those around me how a Sunak or Truss government might affect our work. Growth is certainly the buzzword for both candidates, music to our ears as we have been pressing for this debate for over a year. CBI have reemphasised our plan for growth with trade an integral part. Both candidates will want deliverables early in their tenure, which will increase the importance of the India trade deal, though I expect that the domestic agenda will dominate ahead of the next election.
Decoupling is a live issue
The one area where we can guarantee international focus, in rhetoric at least, is China, Russia and Ukraine. With both PM candidates having strong “China = threat” narratives, one more so than the other, the debate on decoupling will increase. Business cannot run away from this and need to adapt accordingly, indeed many already are. The question politically is how to limit the risk of an inflationary contagion from supply chain diversification and how to incentivise businesses to act. Improving market access including trade deals, seeking partnership which build on UK strengths such as innovation and leading on key sectors including the green transition will be essential.
Need to show international leadership
This global leadership will have opportunities to shine as we head toward a busy Autumn. There is a growing sentiment that the UK has taken a step back from it’s COP26 leadership and is losing momentum on realising the economic competitive edge it could provide. COP27 will therefore be an important moment to reaffirm commitments and show business leadership. Equally finalising the India FTA and the B20/G20 in Indonesia should be an opportunity to shout about the UK building partnerships for future resilience.
US – UK trade not all doom and gloom
Being more proactive in building and supporting these partnerships was one of the key takeaways from my recent US trip with Tony Danker. At both USTR and the State Department, there felt a real desire for an enhanced UK:US relationship. The need to identify an effective platform to engage on future technology and supply chains came up time and again with reference to the EU-US Trade and Technology Council. All conversations were inevitably couched in current politics and, more importantly, the Northern Ireland protocol (NIP). Everyone knows how the US feels about the NIP, it was important to debunk myths and Tony discussed at length the potential role for the US in bringing sides together.
Finally, Dinner with a spy
The US visit was largely to explore two topics – deglobalisation and decoupling. This fed into a member CEO roundtable with Sir Alex Younger, former head of MI6, this week and a subsequent member dinner. The conversation was frankly fascinating and looked at the potential outcome of the Russia crisis, implications for our China relationship and what “ a new norm” means for geopolitical and economic tensions. Key output – we need to double down on our democratic institutions, our capacity to innovate and build future industrial ecosystems and building strong alliances. Expect a reviewed Integrated Review in 2023 under either PM candidate to reflect that.