Opinion: The state of the UK economy

I would like to pay tribute to the success of the New Zealand economy and to the leadership shown by John Key and his government. At a time when the rest of the world was beset by the global financial crisis, we watched as the New Zealand economy flourished and were impressed.

Five years ago, in 2011, the British economy was facing huge challenges. We were struggling to recover from the financial crash and the recession that followed. Our unemployment rate hit a peak of 8.5%. But, under the leadership of British Prime Minister, David Cameron, there was a clear economic plan for us to follow.

We would tackle the crisis in our public finances. We would cut business taxes and boost enterprise. We would take the difficult long-term steps to ensure a lasting private sector recovery rather than pump up the public sector balance sheet still further and risk catastrophe.

No easy shortcut
We understood that there was no easy shortcut to the work Britain had to do. Everyone kept their nerve. And the results have been there for all to see. Over the past few years, Britain has been one of the fastest growing advanced economies in the world. Unemployment has fallen to almost 5%. Real wages are growing. The deficit as a share of GDP is down to nearly a third of what it was. On the back of this, business investment is forecast to grow at 7.4% this year – the fastest growth since before the crisis.

All of which shows the high level of confidence that exists in the UK economy. That strength is in part being driven by our cities. We are investing in them. But we are also devolving more powers to them; we are giving them the freedom to innovate and grow. We have a vision for our great cities such as Leeds, Manchester and Liverpool. A vision of them linking up to become incubators for enterprise – creating jobs, creating growth and improving lives.

Our Northern Powerhouse Strategy identifies the north of England – an area home to 17 million people and 600,000 businesses – as a key driver of future growth.

The city of Sunderland – with a population of about a quarter of a million people – makes more cars than the whole of Italy, with a population 240 times greater. The county of Yorkshire, with about five million people, created more jobs in 2014 than the whole of France with its 65 million inhabitants. In fact, in the north of England, we’re creating a job every six and a half minutes.

We also want to link up our universities, our technical hospitals and our science businesses. To build on their strength to increase wealth and create jobs. To build the critical mass that leads to success. The region is home to 23 of our best universities, each one driving innovation through world-leading research into subjects as diverse as the life sciences, new medicines and digital creativity.

Changes in global economy
In both the UK and New Zealand, we get that huge changes are taking place in the global economy. The question for all of us is how do we innovate and adapt to take advantage of the opportunities that arise.

Never has the need been greater for countries to work together to in search of sustainable growth. We need China to keep reforming, to deliver on the commitments in the Fifth Plenum to allow markets to play a greater role. We need countries like Brazil and South Africa to make greater efforts to diversify, away from state owned companies and to increase investment, particularly in infrastructure.

We need a global commitment to tackle the corruption which stunts global growth. This is why Mr Cameron is hosting an Anti-Corruption Summit later this year. We aim to put fighting corruption at the heart of our international institutions. We want to make the rules and practices that govern global commerce even more resilient to threats from corruption.

We will continue to build stronger and deeper links with the rest of the world. We can’t deliver sustained growth by becoming insular and isolated. We’ll protect ourselves by reaching out to the world and broadening our links by looking to each and every trading opportunity, particularly with close partners such as New Zealand.

Close trading partners
As we face the challenges of a world economy in transition, I am confident New Zealand and the UK will remain close trading partners. The UK is already New Zealand’s sixth largest trading partner. We are the sixth largest destination for New Zealand exports and the seventh largest source of imports for New Zealand in the year ending September 2015.

Now is a great time to join us and invest in Britain. As a government we are investing in innovative infrastructure projects like Crossrail – a smart railway for 21st century London. We’re also backing the largest road investment programme since the 1970s, building new nuclear power and investing in renewable energy.

Under Mr Cameron I am proud to be part of a government working to make Britain the best place for New Zealand companies to establish an international presence. For five years we’ve backed business, large and small. We’ve reformed R&D tax relief – making it more generous. We’ve dealt with the punitive 50% income tax rate because it was destroying enterprise.

But the biggest business tax reform introduced was made to corporation tax. In 2010 it stood at 28%. Budget after budget we have cut the rate, from 28% to 20%, the lowest in the G20. Today, Britain is recognised as a low tax destination for business. Overall the business tax cuts we’ve announced since 2010 will be worth nearly £100 billion to business this decade.

The UK has a vibrant and innovative economy. Our employment rate – over 73% – has never been higher. Nor has Britain been more open for business and we look forward to welcoming more and more New Zealand businesses, partners, investors and consumers.

The Rt Hon Hugo Swire MP is Minister for Asia Pacific at the Foreign & Commonwealth Office. He is on an official visit to New Zealand.

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