Britain desperately needs a proper industrial strategy

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The writer is chair of Canary Wharf Group

The US is the best-performing economy in the G7 and the global tech superpower. It dominates financial markets. It is also a global energy superpower — all the more so as it accelerates expansion into liquefied natural gas. 

It was not always like this. Between 1955 and 2005 the UK matched the US in terms of growth in real wages and real GDP per capita and modestly outperformed in equity returns. However, since the global financial crisis the UK has underperformed, mainly due to lack of investment, driven in part by policy, regulation and tax but also by a lack of political and business capability and ambition.

Donald Trump’s election to a second term as president raises the bar for everyone as the US focuses on domestic growth and lower taxes, with tariffs and more defence spending for foreigners.

The UK chancellor of the exchequer Rachel Reeves recognises the need for growth. Her budget was mainly about fixing underperforming public services, predominantly in health and education. As the Office for Budget Responsibility and Institute for Fiscal Studies highlighted, this delivers modest growth while accelerating net national debt to £3tn. 

Growth requires rapid regulatory and planning reform, but also an ambitious industrial strategy. We certainly need to build on the goodwill created by the recent international investment summit. But we also need an additional £80bn-£100bn of capital investment for the next 10 years, driven mainly by private sector financing sitting alongside “crowding-in” capital from the government.

For me and the many business leaders I engage with, London, not New York, is the best city in the world. We forget to celebrate that London is home to the most successful creative industry in the world, the largest financial market in Europe and the most diverse culture, sports and entertainment imaginable. London is also a technology centre of Europe, with one of the best intracity transport systems.

The US captured the 2000s technology wave. The UK missed it, but now has a second chance and we must seize it.

We all recognise that technology is changing everything — from healthcare, through energy and the world of work, to defence, shopping and education.

Britain currently leads the world in fintech, and Canary Wharf was proud to be chosen earlier this year as Revolut’s global headquarters. The UK now needs new and ambitious plans to lead Europe and the world in other industries.

There are lessons to be learnt from the past. London in the 1970s was depopulating, while the UK economy was weak. We responded in the 1980s with ambitious deregulation and privatisation. London attracted global capital. Modern tech-enabled offices were built with the City and Canary Wharf vying to attract global investment banks and law firms.

Today, London and the other points of the so-called golden triangle, Oxford and Cambridge, lead what has been dubbed Europe’s “new Palo Alto”. More modern technology space needs to be built rapidly, while at the same time recognising the importance of sustainability and communities.

Britain leads Europe in venture capital, but still lags far behind the US in the critical $100mn scale-up segment, where businesses experience rapid growth in terms of employees, revenues and market share as they move into their next stage of development. Over 80 per cent of our scale-up capital is provided by the US and other international investors. This won’t change unless our policies, regulation and pensions system are overhauled. Even regulators have stated they don’t want to be regulating graveyards. 

Constructive collaboration between central and local government, business, planners, regulators and communities is essential. We at Canary Wharf will raise our game. We are optimistic that others will also invest in Britain to achieve the growth the UK should be delivering.