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CBI says free market has left UK with ‘branch-line economy’

The CBI will today tell ministers that levelling up cannot be left to the free market, with regions suffering from decades of a “benign neglect” that has left the country with a “branch-line economy” where too many companies are centred on London and the south-east.

Speaking in Port of Tyne at the start of the business group’s three-day annual conference, the CBI director general, Tony Danker, will argue the UK now has a “shot at redemption” if the high-quality jobs needed to move the economy towards net zero are created in former industrial heartlands.

“Simply saying the market will fix this is not good enough,” Danker will say. “There are free-marketeers in the debate who say government should never play an active role like this. But I don’t know a country in the world – including, and indeed especially, the United States – where governments aren’t active in economic geography.”

Boris Johnson’s administration has come under fire from business for a lack of clear direction after the UK’s exit from the EU, and in the transition to a greener economy. The chancellor has delayed a review of business rates, and national insurance taxes have been raised to pay for healthcare, increasing the cost of labour. One of the first decisions made by the business secretary, Kwasi Kwarteng, was to scrap the Industrial Strategy Council, set up in 2018 as an in-house thinktank to advise on the regeneration of the regions.

The CBI speaks for 190,000 businesses, which between them employ 7 million people, about a third of private-sector staff. Under the theme of levelling up, its conference will be held in several locations for the first time. The hybrid event will be livestreamed, with sessions held in front of audiences of business leaders in places including Birmingham, Yeovil and Swansea.

Danker is calling for a partnership, saying neither the government nor business can solve levelling up alone.

“Since the 1980s, we let old industries die – offering little more than benign neglect for what got left behind. It was an economic policy that was ambivalent about levelling down,” he will say.

With the arrival of new industries such as biotech, space travel and cybersecurity, there is now a chance to create wealth across the regions, he will add. The CBI wants former industrial heartlands to have a role in transitioning to a less polluting economy, with clusters of activity in hydrogen – which could replace gas as a domestic fuel – offshore wind, and carbon capture.

Danker will point to south Wales, which is emerging as a player in the manufacture of certain kinds of computer chips.

He will caution that business investment is an “achilles heel”, underpowered since the 1990s and on track to come back lower still after the pandemic.

“The truth is that in too many sectors, the UK now feels like a branch-line economy,” he will say, “with the most productive parts of a sector, such as HQs, too often based in London and the south-east, and the branch managers and the back office based everywhere else.”

The CBI will today announce the creation of a new commission, the Centre for Thriving Regions, to act as a vehicle for the private sector to encourage the creation of hubs of industrial activity. The centre will launch two pilot demonstrations, and be staffed from all nations and regions of the UK by local, national and multinational businesses and universities or colleges.

Danker called for businesses to be involved in strategy for the regions alongside mayors and central government, making decisions on new investments in universities, airports, or logistics centres.

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CBI says free market has left UK with ‘branch-line economy’

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