Can I give my thanks on behalf of the Department of Trade and Industry to Ambassador Phil Lader for organising the conference that we are taking part in today. It's a very good demonstration of how the United States and the United Kingdom, at the beginning of the 21st century, can consolidate the special relationship that exists, not just government to government but also between the people of our countries.
I have got 15 minutes to talk about the challenges of the new economy and I know that many of you are being restricted to just 2 minutes, so I will stick to my 15 minutes if at all possible.
If we look at the new economy, one of the great challenges that we face is the very rapid pace of change that we have to respond to. That is the defining characteristic of the new economy, of the knowledge driven economy. It is not just that change is taking place but also the pace at which change is occurring.
And one of the great responsibilities of governments in the 21st century is not the old approach of governments - certainly here in the United Kingdom - of trying to intervene and dictate how businesses conduct themselves. Those days have gone.
Our responsibility is to create a framework, a climate within which businesses can prosper. And to ensure that people recognise the importance of change and don't resist it.
We have a job in government, with business, to convince people that change is a bringer of opportunity and not a threat. Many people feel uncomfortable about the nature of change. Lots of people prefer the status quo. It is comfortable and they would much rather have things as they are than face the challenges that come from having to adopt change, whether it be working practices or new ways of doing business. So I think the responsibility of government is to help people through that process of change.
There is also a responsibility to demonstrate the importance of enterprise. All companies, whether they are large or small, need to recognise that enterprise is the real engine for growth and for their own prosperity.
We have a problem in the United Kingdom in terms of the enterprise agenda. It is not something that many British people feel comfortable with. There is a great British tradition of praising the plucky loser . But I think the downside of that is that very often we actually feel uncomfortable with celebrating the successful. We need to be more at home and more at ease with actually supporting people when they are successful. We need to create that climate of enterprise where we acknowledge that enterprise is important for all of us and being successful brings benefit not just to the individuals but actually to the wider community and society as well.
To enable enterprise to flourish we must have economic stability. I know the Chancellor this morning would have outlined the steps that he has taken to ensure that we have now created the conditions of economic stability here in the United Kingdom, with inflation low, public finance now on a sound footing, long term interest rates at a 40 year low. Now those have not been easy to achieve. There have been some tough decisions that the government has had to take to achieve those. But now that we have got economic stability, that provides us with a great opportunity to move ahead and meet the challenges of the new economy.
In order to meet the challenges of the new economy, we need to give business the confidence to plan ahead, to invest, whether it be in R and D, whether it be in skills, whether it be in new equipment and new machinery. Businesses will only invest if they have the economic stability around them which enables them to take those decisions in the confidence that things are not going to move in a direction which will be destabilising as far as they are concerned.
Now in terms of how we can meet the challenges here in the UK, I just want to touch on three areas which I think are particularly significant.
- Firstly we need to look at ways in which we can remove barriers to investment to ensure that people can get the financial backing they need to turn their ideas into a successful business;
- secondly, to encourage innovation, ensuring that businesses continually improve and research developments are turned into commercial application; and
- third, to make sure that we can tap the potential and the talent of all our people.
The first of those then - investment. Earlier today the government announced the inward investment decisions and our record for the last financial year. This showed a record year as far as inward investment in the United Kingdom is concerned. The figures also underlined the very strong business relationship that is continuing to grow between the United States and the United Kingdom. 40% of all US investment in the European Union comes into the United Kingdom, creating more than 44,000 jobs here in the last year alone. That inward investment makes an important contribution towards enterprise in the United Kingdom.
Private investment is clearly crucial, but government has a role to play as well, particularly in the United Kingdom where there are large regional disparities in terms of business growth and business start-ups. One of the real challenges that we have in the UK, and I think it may be in the States as well, is that we have some parts of the country which are really growing at dramatic speed, and we have other parts of the country which are being held back, where the economic growth that we want to see is not taking place certainly at the pace that we want to see. And for some of those areas obtaining finance to support business start-ups is one of the real problems that they have to tackle. One of the issues that we have been looking at is how in government we can encourage the private sector to invest in those regions where perhaps traditionally business hasn't been so committed. To secure investment for those areas so that we can have business start-ups throughout the country and not just targeted and concentrated in particular geographical locations.
The second area is innovation. The exchange of ideas and the application of knowledge is clearly essential to the modern economy. Both in the UK and in the United States we have great track records of world class research. Last week's announcement on the Human Genome Project was a very good demonstration of that. And this morning, as you will have heard from the Chancellor, we have committed ourselves to further substantial investment in the UK science base. But in the modern economy it is not just good enough to have ideas and to have knowledge as some sort of abstract concept, we also have to make use of it.
Someone was telling me the story the other day, some of you may know of this, that it was the Romans at the University of Alexandria who invented the steam engine and mechanical gears. But because there were no incentives at the time to commercialise it, they simply used it to open the doors of a temple, and no other use was made. It took over 1500 years before the steam engine revolutionised the economy and society as we now know.
Unlike ancient Alexandria, in the 21st century we need to ensure that ideas that we get from our universities are exploited commercially and are taken to market. And we need to offer incentives to universities to do so - certainly in the United Kingdom where perhaps our institutions of higher education don't have such a history of spinning out commercial ideas. In our universities there are great ideas and lots of wisdom. We need to ensure that we can exploit those in a way which bring benefits, not just to the university itself but also to the wider community as well. And I know from my experience of the United States you have many good examples of universities being very closely involved in the world of commerce and exploiting their ideas in a commercial way. I think in the United Kingdom need to learn from that.
That is why my department in the relatively near future will be publishing a White Paper, a statement of Government policy, on the whole area of science and innovation - bringing the two together. We will be looking at ways in which we can promote innovation in each region of the United Kingdom and also develop in a far more effective way the links between universities and business.
The third aspect I want to touch on is that of inclusion. In a knowledge driven economy, the new economy, people and their ideas are the most valuable asset that we have. Economies will be successful if they can draw upon the skills and the potential of their people, widening opportunities for enterprise, encouraging people to be enterprising, to take risks. And to do so there are occasions when we have to protect them from the consequences of failure. If the price of failure, the price that the individual has to pay, is too high in financial or social terms, then that can discourage enterprise and the taking of responsible risks. If we look at the solvency and the bankruptcy laws here in the United Kingdom they are very much based on a sort of Victorian notion of failure and people being stigmatised if they are involved in a business failure. We believe that a different approach is needed for the 21st century.
My department has just completed a consultation exercise on how we can change our personal bankruptcy and business insolvency laws here in the United Kingdom, trying to make a distinction between effectively two groups. The honest individual who works hard, who tries hard but perhaps things aren't quite right and the business doesn't succeed. To make sure that that individual is not stigmatised for the rest of their life. The "honest bankrupt", if you like. As opposed to the individual who deliberately sets out to exploit their creditors and to take advantage of corporate liability. Now that individual is in a different category and we need to make sure that they are treated in a different way.
In the United Kingdom we make no such distinction at the moment. All bankrupts are treated in the same way. And so we are looking at ways in which we can distinguish between the two and ensure that the honest hard working person who tries, but perhaps is unsuccessful, is not then stigmatised for the rest of their life but can be given an opportunity to re-enter the world of commerce as soon as is reasonably possible. We have finished that consultation and I hope we will be able to make some announcements on that in the near future.
We are also looking at ways in which we can support those enterprises which are based on knowledge rather than tangible assets. We are also today publishing a consultation document looking at how we can provide finance for those bodies which are more involved in knowledge based business - rather than the traditional way in the United Kingdom of arranging finance, which is to provide finance secured on a tangible asset. Very often some of the new businesses that we have simply don't have those tangible assets on which finance can be secured. I believe there needs to be a new way of looking at those particular issues.
We have established the Small Business Service, which will have a very crucial role to play in the United Kingdom in ensuring that small and medium sized enterprises, which will increasingly be the engine for growth in the new economy, have the support and the assistance that they will need. This is breaking new ground for us in the United Kingdom. Many of you in the United States, with your experience of the importance of the small business sector, will be wondering why it has taken the UK so long to set up an agency with responsibility for driving forward and supporting the small business sector. Well it has taken a long time but it has been absolutely the right thing to do. We now need to make sure that as we develop the Small Business Service it is one which is supporting business, which can play a very crucial part in meeting the challenges of the new economy ahead.
I just want to conclude by saying this. I believe increasingly that there is a common agenda which business and government share. It is an agenda which is about innovation, it is about supporting enterprise, it is about getting the best from the talents of all our people. There is much that we can learn from each other. We say that in the United Kingdom in terms of the business and government relationship. I know that there is also much that we can learn from each other in terms of the US and the UK relationship. This conference is a great opportunity to have a genuine dialogue. I hope the comments that I have been able to make this afternoon by way of introduction has briefly outlined some of the issues which are of concern to Her Majesty's Government and I look forward in the rest of the afternoon to exchanging ideas with you, to have a genuine dialogue, and I am sure we can all leave the conference feeling that we have made a real contribution towards meeting the challenges of the new economy in the 21st century.
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