It is vital that we also look beyond Brexit
"The opportunities for economies generally, and businesses specifically, to adapt, change and innovate to address climate change and create new growth opportunities are there - if we are bold enough to grasp them."
At this time of almost unprecedented uncertainty about the future, it is all too easy to focus on the short-term - the B-word which is dominating the agenda of politicians, media, businesses and economists alike.
But while Brexit is hugely important, it should not be allowed to blind us to the broader, longer-term challenges that we must also be actively thinking about.
Economic systems operate in cycles. They oscillate around a longer-term growth pathway and neither short nor long terms should be neglected. So let's take a break from Brexit for a moment and focus on some longer-term economic challenges and opportunities and consider how we can best position ourselves.
Looking into the future, there are some broad drivers of change that will shape and inform global and, in turn, national and local economies.
- Climate change – a recent IPCC report reiterated the significant impact of climate change and the increasing urgency for action to limit the increase of average global temperatures.
The report finds that “climate-related risks to health, livelihoods, food security, water supply, human security and economic growth are projected to increase with global warming of 1.5oC and increase further with 2oC”."
It is clear that technology, innovation and addressing market failures within the economy will be key to limiting these temperature increases. Even as the IPCC report was published, the Nobel Prize for Economics was awarded to William Nordhaus for his work on how environmental impacts must be integrated within economic thinking to enable more effective policy development and investment in technologies.
The opportunities for economies generally, and businesses specifically, to adapt, change and innovate to address climate change and create new growth opportunities are there - if we are bold enough to grasp them.
- Pace and scale of change – rapid technological change is enabling things considered impossible only a few years ago. Artificial intelligence, machine-learning and automation are radically transforming how we work, so much so that it has been labelled "the fourth industrial revolution.”
This technology will create a plethora of new business opportunities and has the potential to happen much quicker than many people think. It will also help tackle wider issues such as climate change but is likely to be hugely disruptive for the labour market with technology displacing a range of occupations. New jobs with new skills sets will emerge to replace those lost, but it may be difficult to match up those who lose their jobs with new opportunities.
- Inequality of wealth and income –a recent economic trend has been the growing income inequalities between the wealthiest and poorest at global, national and local levels. Ownership of assets and capital is becoming more limited which could have further consequences as technology advances as the owners of the robots and automated machines will generate greater levels of income, potentially increasing inequality.
These broad global issues may seem far-removed from the Warwickshire economy but they are, in fact, entwined within it. Businesses in our region lead the way in many of the technologies that will shape our future; electric vehicles, battery technology, connected & autonomous vehicles, artificial intelligence, interactive entertainment, digitisation of services and automation.
Helping to support and grow these sectors will generate growth and prosperity within our area and, as these new sectors grow, it is important that we equip our labour force with skills needed to support people through transition to new technologies and occupations. Finally, we need to ensure that we are achieving “inclusive growth” - that all parts of society benefit from a growing economy.
All these issues are being actively considered within the development of a Local Industrial Strategy. The West Midlands Combined Authority has recently launched a consultation draft for a strategy for the wider WMCA area and work has started on a localised version of this for the Coventry & Warwickshire area.
These strategies will take a longer-term look at how local economies can grow and prosper, thus ensuring that we deliver policies, actions and investments which will enable us to positively respond to these wider drivers of change.
A copy of the WMCA’s consultation draft Local Industrial Strategy can be found at:
https://www.wmca.org.uk/what-we-do/industrial-strategy/