Chris Blythe: Recession may herald a new industrial age

Established as the Builders’ Society in 1834, the institute has witnessed about 20 recessions in that time. That’s roughly one every nine years, and I guess that there will be 20 recessions or so in the next 175 years.

So, among all the gloom surrounding this recession, it helps to keep a sense of historical perspective. I also believe there are rays of hope and scope for optimism.

The state of our banks must be quite humbling for the bankers and regulators responsible for the debacle. Whether they have the capacity to recover is questionable. If the finance sector is not going to be the engine of economic growth, where will our future wealth come from?

The readjustment in the value of the pound creates an opportunity for Britain to become a substantial manufacturer again. Certainly we could develop a serious competitive advantage within Europe, our major trading group. This could be the start of a new industrial age.

The truth is that the UK is now probably one of the best places to invest – and a few tweaks in policy by government could make us the best place to invest.

Here are some suggestions for policy changes. First, let’s abandon the 50% target of 18-30-year olds to enter higher education. That might have been worthy when we were aiming for a financial services-based economy, but it’s not appropriate for a manufacturing-based economy. Instead, we need to boost skills at technician level. We don’t want thousands of graduates laden with debt doing inferior jobs. We need appropriately skilled people who can add real value.

Funding for higher education needs to be redirected to giving skills to the majority and leaving the universities to concentrate on what they do best – innovation and research, and teaching without the need to dumb down.

Second, introduce generous capital allowances or government grants for new manufacturing facilities. That’s far more preferable than investing in toxic bank assets, and would give us wealth-creating assets for the future.

Third, revise our climate change targets. More manufacturing will increase our energy use, so the expected reduction in CO2 emissions will not happen. In global terms, this is not an issue, as we will only be re-importing the CO2 emissions we had exported anyway. In fact, we may be better off – at present, we are polluters by proxy, so bringing the pollution ‘home’ puts us in direct control of tackling it.

The fourth would be to accelerate the development of both nuclear energy and renewable energy.

In 1834, the founders of the Builders’ Society were already planning for a future where building was going to be done on a scale never seen before. Now would be a good time for the same to happen again.