Department of Trade and Industry

Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)

Yorkshire International Business Convention


Friday, June 09, 2000

Other speeches

We are witnessing a fundamental shift taking place in our economy and society. Driven by globalisation, technology and innovation.

Changing the nature of work and of the workforce itself.

The new economy has as its cornerstones knowledge, skills, innovation and enterprise.

The successful economies of the future will excel at generating and disseminating knowledge and exploiting it commercially.

Today I'd like to set out not only some of the measures we've taken to improve our business environment - but also to look at what I believe we need to do in the future to ensure we remain a good place to do business. And not only in the UK, but in Europe as well.

Global markets mean that all sectors have to adapt to compete in the future.

That has always been the case. But in the 21st century the changes affecting industry are happening at an ever increasing speed.

A speed which Government and industry hasn't always kept up with. But we must in the future.

That means that the Government must - like business - focus on the future.

Our objective must be a dynamic knowledge based economy founded on individual empowerment and opportunity.

Where government enables but does not dictate and the power of the market is harnessed to serve the public interest.

The challenge for Government is how to prepare Britain for a world in which knowledge is the new currency.

An approach which recognises that the role of Government has fundamentally changed, but that it still has a critical part to play in improving the performance of the British economy and in improving life for all.

To drive forward an active industrial policy which puts in place the building blocks we need for the future.

Let me begin with the building blocks.

First and foremost business needs economic stability.

Stability matters more than ever in the new economy. Because more than ever we need businesses to invest in knowledge - be it through R&D, or through training, as well as continuously to take risks to stay ahead in fast moving markets. We can ill-afford this vital investment to be put off through fears about the economy and its long term stability.

Getting the economic conditions right is only the first building block.

We must remove barriers to investment.

We must also ensure that the science base is properly funded and linked to industry.

We have boosted investment in the science base by 1.4 billion.

We have a remarkable track record in this country of world class research.

But in the modern economy it is not enough to produce knowledge - we also have to make the most of it. In a Science and Innovation White Paper later this year, we will set out how we can ensure that our research lead is carried through into industrial application and exploitation.

And we must ensure that the skills of our workforce meet the future needs of industry.

Investing in basic literacy and numeracy and in the technical skills, IT skills and management skills that industry needs.

The level of qualifications in the adult population is rising in all regions of the UK. But there are differences between regions.

The proportion of the working population with level 4 qualifications is below 25% in a number of English regions - including Yorkshire and the Humber.

And still too many young people leave school at 16. 64% of 16 year olds in Yorkshire and the Humber are in full time education - compared to 75% in London and the South East.

Raising the level of skills in our regions is essential if we are to raise the regions' economic performance.

In the modern economy we can not afford educational underachievement. We will continue to invest in education. It remains our top priority.

We have to encourage people to stay on at school. To go on to university. And yes, to encourage young people from state schools and from poorer areas that they can and should aim high.

We also need the right infrastructure.

What my Department has set out to do is to build the infrastructure of the knowledge driven economy. We have aimed as high by declaring that we want to make Britain the best place in the world for electronic trading.

In the last three years we have done much to turn this ambition into reality.

OFTEL has opened up BT's local network to allow the competitive provision of higher bandwidth services.

We have placed the UK at the vanguard of Europe in terms of the licensing of third generation mobile services. And later this year we will be launching an auction for new spectrum to allow broadband wireless services.

But we also need to give people access to these networks. We can not afford to have a 'digital divide' between IT haves and have nots.

That is why we are creating 800 IT learning centres. That is why we are encouraging the recycling of computers for those who cannot afford new ones. And that is why we have set a target of 1.5million SMEs wired to the digital market place.

Don't believe the hype that says e-commerce is all about dot.coms. Business-to-business transactions account for an estimated 80% of e-commerce. E-procurement, supply chain management systems and process automation are delivering real benefits to traditional businesses.

But we still have a way to go to achieve the productivity gains seen in the United States.

That's why we will be working with different industries to assess how they can better take advantage of the new technology.

Secondly, on top of these basic building blocks, we must create a modern framework of regulation. One that drives innovation and competition and encourages growth and increased productivity.

Modern, industrially advanced economies are complex. Governments take a huge range of decisions which affect industrial success.

It is the role of my Department to ensure that sustainable wealth creation and business growth are at the heart of these decisions.

We must make sure that markets work effectively.

This means having a strong and robust competition policy and consumers who are well informed and confident.

As the world opens up British firms will only succeed in winning market share if they have access to markets and the capability to compete.

Opening up markets is one of my priorities - we are driving this forward in the UK where for example there is now full competition in electricity and gas supply. We have introduced a tough new competition regime to ensure that anti-competitive practices and the abuse of dominant positions can be halted and punished.

I believe that consumers also have a key part to play in the drive to improve our competitive position and raise productivity. There is a strong link between informed consumers, demanding good value, and world class businesses, providing more responsive and innovative service.

Companies which can meet the growing expectations of domestic consumers will be better equipped for the challenges of international markets. We are therefore improving access to information and advice for consumers, and promoting more effective codes of practice to help people get problems resolved.

In a modern economy we need a modern legal framework for companies. The Company Law Review - which will report next spring - is the first fundamental review of company law in nearly forty years.

This is likely to be a key issue in the next Parliament. Reforming company law, to bring it into the 21st century. To provide business with the clear, consistent and modern framework they need to adapt and compete in the future.

The third vital area of industrial policy is support for business.

Providing world class, forward-looking business support for businesses to expand at home and overseas. Helping all sectors.

Improving our help for exporters with the new Trade Partners UK network, which is harnessing the collective support of more than two hundred organisations across Britain. Helping more firms win international business.

Helping small firms through the new Small Business Service - the first Government agency dedicated solely to small firms.

Promoting innovation.

In all these areas Government has a vital role. Driving change, creating opportunities, supporting companies.

This is an approach which we are also taking in Europe. And which other European countries are developing.

Economic reform is already happening in Europe.

In Germany, the government is introducing reforms to capital gains tax, opening the way for the radical restructuring of German industry.

40% of French shares are now owned by people who aren't French.

Italy is reforming its labour markets.

Belgium, the Netherlands and Scandinavia are setting the pace in Europe on welfare reform.

In March, leaders of the European Union agreed a major programme of economic reform at a special summit in Lisbon.

The programme has a clear strategic goal for the European Union for the next ten years: to become the most competitive and dynamic knowledge-based economy in the world.

This represents a sea-change in European Union economic thinking.

There is now a new direction for Europe away from the social regulation agenda of the '80s and instead focused on enterprise, innovation, competition and employment.

Being at the heart of Europe has enabled us to argue the case for these reforms with our European partners.

We have succeeded in Europe by playing a constructive role.

An important part of my role as Secretary of State for Trade and Industry is to champion British businesses and those based here.

To help improve the competitive position of British business. And open up new opportunities for British trade.

That means that my views on the single currency are governed not by any dogmatic ideological position, but with Britain's best economic interests at heart.

That is the basis for my strong support for the Government's position. That, provided the five economic tests set by the Chancellor in October 1997 are met, Britain should join a successful single currency provided the people of our country vote for it in a referendum.

When asked for their views, business opinion is divided.

This is partly , I suspect, because some fear we would join under the wrong conditions. However the five tests set out by the Chancellor mean we would only join under the right conditions. And assuming this is the situation the business benefits would be clear.

Above all else, businesses need stability and certainty.

We have created economic stability here in the United Kingdom with inflation at or around target; long term interests rates at the lowest level for forty years and sound public finances.

The benefits of a single currency are widely documented in terms of trade, transparency of costs, macroeconomic stability and currency stability. The single currency has eliminated exchange rate uncertainty on trade within the Euro area. Almost 50 per cent of our total trade is with the euro area; the UK and euro zone are each others' largest trade and investment partners.

It is still very early days for the Euro. So too soon to make any judgement. But membership of a successful single currency would give European businesses the same advantages already enjoyed by their competitors in the United States.

By opening up a larger market and reducing exchange risks and costs, businesses should be able to take greater risks in developing new products and services.

We already have a single market of some 380 million consumers. The single currency complements this. A successful single currency should offer greater potential rewards, and incentives, for entrepreneurs to develop new products and services we need to maintain our competitive position.

These are issues not only for British firms but also for internationally mobile companies.

Inward Investment in the UK remains at high levels. But the Government has always stressed that it will take into account inward investment in deciding whether to recommend membership. Investment is one of the five economic tests.

From what inward investors tell us, it is clear that they will be making the same considerations as this Government: is joining a single currency in our economic interests? Above all, how will it affect their business in practical terms?

What business wants is a Government that takes an approach to the single currency which is based on the economic interests of our country. Not one based on political dogma.

If we were to rule out joining for a period, even if during that time it would be in the national interest to join.

Or if we were committed to joining at a fixed time regardless of whether it would be in our interests.

These two positions represent a triumph of political dogma over the national interest.

Our policy is clear.

It was stated by the Chancellor in October 1997 and by the Prime Minister early in 1999.

We remain in favour of joining in principle; in practice, the economic conditions must be met. It must be good for jobs, for investment, for industry.

We will judge if the five tests have been met early in the next Parliament. If the economic tests are satisfied then we should join the single currency if that is what the Government, Parliament and the people decide.

We will put the interests of our country first, the interest of our businesses, and provide the British people with the opportunity of exercising a genuine choice in this important area.

In the meantime, the reality of the situation is that Government and business should continue our active preparations to give the UK the genuine option to join the euro early in the next Parliament.

We need to be prepared and ready for change, if it is in the national interest to do so and has the support of the British people.

In Government the questions we face are often difficult, complex and technical. We should never lose sight of the fact that the answers we give will affect individuals, families and communities.

The challenge is to lead people through change. To ensure that they are partners in change, not victims of change.

We intend to meet that challenge on behalf of the people of our country.

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