“We need to find the profitable niches where we are already have great businesses, and help them to become world leaders” says Andrew Hunt.
The first Olympics I remember watching was Atlanta 1994. It wasn’t a great one, with the UK just pipping Belarus in the medal table, but behind North Korea. Oh Dear. And yet by London 2012, Plucky Britain came in third, yapping at the heels of the two global superpowers, China and the USA.
How did the UK transform its fortunes? The answer was by homing in on neglected niche sports.
If you just throw money at athletes, you end up with lots of excellent runners and not many of medals. Instead, Team GB focused on the most niche sports where we already had talent. Here, the competition is less intense so you are much more likely to win. And we did even better in the Paralympics: focusing on a niche sport and a niche category produces even better results.
Now Britain’s industrial strategy needs to follow our Olympic heroes. We need to find the profitable niches where we are already have great businesses, and help them to become world leaders.
Sadly, the government’s current approach is just to throw vast amounts of cash at the hottest industries, pitting ourselves against the economic might of America, China and the EU. Watching ministers haplessly throw our money at the latest, new thing – from AI to renewables – is like watching a gawky first year hopelessly chase after the prom queen while ignoring all the girls he could be dancing with.
Watching ministers haplessly throw our money at the latest, new thing – from AI to renewables – is like watching a gawky first year hopelessly chase after the prom queen while ignoring all the girls he could be dancing with.
Predictably, the results have been catastrophic and expensive. Our foray into space travel got as high as 500 metres before crashing back to earth. Meanwhile, the country’s efforts to enter the red-hot market for battery storage ended with the chaotic bankruptcy of BritishVolt. While there was celebration at the UK wining the bid for a £4bn electric vehicle factory, this came at a cost of £500m in taxpayer subsidies.
Because these industries are so competitive and pit us against the world’s superpowers, they are unlikely to ever make any money back for tax payers. Moreover, in cutting edge and hyper-competitive industries, the technology changes so fast that you can end up wasting billions on worthless white elephants. We might well find that our much vaunted Electric Vehicle factory is obsolete by the time it opens.
Fortunately, there is a much more profitable way for the government to support British business.
What we need is an Olympic style industrial Strategy: one that supports the HIGH WAGE, NICHE INDUSTRIES, WHERE WE ALREADY HAVE A STRONG POSITION.
It is amazing how many niche industries there are where Britain is already world class. Think of aircraft parts, insurance broking, oncology research, animal husbandry, music and TV, film post-production, and oil & gas engineering.
And it is amazing how many niche industries there are where Britain is already world class. Think of aircraft parts, insurance broking, oncology research, animal husbandry, music and TV, film post-production, and oil & gas engineering. And while we don’t have social media giants like Google and Facebook, we lead in areas like IT training and gaming software.
Best of all, industries like these PAY GOOD WAGES, USE OUR EXISTING SKILLS BASE AND DON’T REQUIRE MASS MIGRATION.
Having identified our gold-medal winning niches, we need to ask our SMEs and entrepreneurs what they need to take over the world. It is vital to FOCUS ON SMALL AND MID-SIZED COMPANIES rather than industry giants. This is because SMEs have the potential and the desire to grow.
The trouble with mega-corporations is that they just want more regulation and bureaucracy to stifle up-and-coming competitors and protect their dominance. Invariably they demand enormous bureaucratic subsidies that are so complicated that smaller companies struggle to complete the paperwork. It is no surprise that surveys consistently find that British people like and trust small and local businesses more than faceless multinationals.
Thirdly, financial support for our gold-standard SMEs should be through LOW TAXES AND NOT SUBSIDIES. That’s because low taxes create a raw incentive for companies to succeed commercially, while attracting profitable enterprises that are already winning. By contrast, subsidies engender dependency. Companies get so used to them that they can never function without government support. And instead of producing a great product or service, all the focus goes on getting the subsidies. Worst of all, subsidies encourage government jobsworths to interfere, creating vast amounts of pointless bureaucracy for anyone trying to apply.
A good example of the trouble with subsidies is Peppa Pig. Peppa Pig is one of the world’s most successful TV franchises; a billion pound export that was home-grown in Britain. Like Wallace & Gromit, Peppa Pig is a classic cottage industry success story. In response, the Government spent £60m on a scheme to find “the next Peppa Pig.” Needlessly to say, lots of diversity boxes were ticked, and lots of very dull but worthy kids TV programmes were made, but nothing that any child actually wanted to watch. This is the tragedy of subsidies: lots of money spent, lots of bureaucracy, and no viable product. Give me low tax entrepreneurism any day!
As well as low taxes, niche industries need TARGETED REGULATION. That is, low regulation, but the right regulation where needed. As part of levelling up, we should GIVE BRITAIN’S REGIONS REGULATORY AUTONOMY to support their star industries, by letting local leaders cut back on excessive red tape, while strengthening vital business requirements such as contract enforcement and property rights.
If you want to see what gold medal winning regional entrepreneurism looks like, take a drive through Zug in Switzerland. Zug is a small medieval town and is one of the wealthiest places on earth. When driving through Zug, car enthusiasts are advised to keep their eyes on the road, which can be difficult because there are so many supercars about. In Zug, Ferraris are as common as Ford Fiestas. Like other Swiss cantons, Zug enjoys enormous regulatory and tax autonomy. This freedom empowered it to become a global centre for highly profitable niche industries like commodities trading. The chances are that the rare metals in your phone, the juice on your breakfast table and the gas in your car have all been traded through Zug.
When driving through Zug, car enthusiasts are advised to keep their eyes on the road, which can be difficult because there are so many supercars about. In Zug, Ferraris are as common as Ford Fiestas.
The Zug example is the answer to Levelling Up. Throwing endless amounts of borrowed money at HS2 or the Scottish and Welsh governments has done nothing but fostered a culture of dependency, socialism and bitterness. Instead we should hand our regions the tax and regulatory autonomy to boost their businesses into world champions.
If British industry is going to win like our 2012 heroes, we need to focus on highly profitable niches, where we already have talent, listen to our small and mid-sized companies, support them with low taxes rather than bureaucratic subsidies, and level up our regions with autonomy to deregulate.
A new Olympic-standard industrial strategy is our golden opportunity to slash wasteful government spending, increase local autonomy and economic freedom, and put British business back on the top of the world.
Author Andrew Hunt graduated from Cambridge with a Law degree in 2003. He worked in TV production before moving into finance. It was here that he became fascinated by how personal investors and small companies could turn negligible resources into enormous fortunes. Applying the same mindset and principles, Hunt was able to retire in his thirties. He now invests in interesting projects which aim to make the world a better place and runs a radical centre-right environmental think tank. He is also the author of Better Value Investing.
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