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🚨 NEW REPORT 🚨
The Alan Turing Institute has visibly struggled, and is now at a critical juncture. The Secretary of State has intervened. What happens next?
A new report for @britishprogress.bsky.social by me and @jujulemons.bsky.social sets out a plan: 🧵
Britain has world-class universities, strong labour markets, leading industrial clusters, and a sophisticated financial market. We need to focus on structural constraints that stop these advantages turning into attractive investments.
The most important is to fix the sources of the UK’s cost disadvantages relative to other countries (planning, energy, infrastructure), but we must also improve financial markets by removing frictions - not forcing artificial allocations.
Trying to revive financial flows without addressing fundamental barriers to economic activity is like treating the symptoms and ignoring the disease. To achieve both, we propose two necessary conditions:
Overall, these effects are second-order. The fundamental issues of high input costs and availability: energy, industrial locations, and limited housing availability in key clusters create systematic disadvantages that no amount of capital can overcome.
Plus, once implemented, beneficiary interest groups will fight future reversal, locking in costly mistakes. If directing UK savings to underperforming assets ends up hurting returns, we'll be paying for it long after the policy fails.
But financial markets are not perfect. MiFID II reduced incentives for research coverage of smaller companies. Britain's 0.5% stamp duty is higher than most major markets. Pension fragmentation limits sophisticated investment.
The difference? Fintech operates where Britain has advantages: a strong sectoral cluster, low physical footprint, deep talent pools. Manufacturing firms or data centres face high energy costs and planning complexity.
We can see this in the divide between different types of companies: UK fintech (Revolut, Monzo) readily access capital.
Manufacturing firms or those dependent on access to infrastructure struggle. Same financial system, very different outcomes.
If companies are struggling to find attractive opportunities, and persuading investors to part with their funds, simply channeling more capital towards them won't solve anything. That misdiagnoses the problem.
Forcing savers to invest in British companies addresses a symptom, but misses the underlying cause.
It also ignores what companies are telling us. UK manufacturers cite 'uncertainty of demand' and 'inadequate returns' as their main investment barriers, not the 'cost of finance'.
Will throwing more money at British companies actually help our economy?
Politicians keep threatening to direct British savings & pensions to UK equities. But this won’t fix the underlying reasons for Britain’s low investment & productivity – and could deliver worse returns. 🧵
How does R&D contribute to economic growth? A response to David Edgerton from me & @pedroserodio.com
johnsonb.substack.com/p/r-and-d-do...
The Progress Post: our new substack
We'll look beyond policy to the cultural currents behind British progress, and the ideas, values, & visions that we're building towards.
Today: our April newsletter, upcoming events, & bookshelf with pieces from @droojb.bsky.social & Jack Wiseman
New episode of THE ABUNDANCE AGENDA!
Why we love Luton Airport, and a terrible plan for changing the London Mayoralty.
Plus we speak to @davidlawrenceuk.bsky.social and @jujulemons.bsky.social about the launch of @britishprogress.bsky.social !
Listen:
www.abundancepod.com/p/why-we-lov...
Hoping that the more skilled half of the team can raise me up to their level.
A big thank you to @jujulemons.bsky.social and
@davidlawrenceuk.bsky.social for the invitation - I am thrilled to be working with the very talented team of
@freddieposer.com, @ersatzben.bsky.social, @maxxturing.bsky.social , @droojb.bsky.social, and Tom Blake, as well as @lyan82.bsky.social.
Now that all the top people have made their announcements, we shouldn't overlook the bottom half of the productivity distribution: I am extremely pleased to be joining
@britishprogress.bsky.social as Chief Economist!
bsky.app/profile/brit...
Cover of the essay Rediscovering British Progress available at https://britishprogress.org/articles/rediscovering-british-progress
💫 We’re launching the Centre for British Progress
Our founding essay: Rediscovering British Progress is a case for growth that drives shared progress, rooted in Britain's values and industrial heritage.
It all starts with a postcard from 1870 👇
britishprogress.org/articles/red...
The OBR’s role in ensuring fiscal accountability is too important to risk in disputes over its political nature - 2022 proved that.
But it needs tools to help it respond to the needs of governments who want to focus on long-term growth.
Full piece here:
ukdayone.org/briefings/ho...
When HMG policy is shaped by OBR forecasts, and Govt is pushing on reforms that the OBR toolkit wasn’t built for (like reg. reform), it creates a pressure to reshape the OBR's role and question whether it has become a political institution.
The result is a difficult feedback loop that my new piece with macroeconomist Rohan Shah for
@ukdayone.bsky.social examines:
ukdayone.org/briefings/ho...
This elevates the role of OBR "judgement" for key forecast inputs (eg, productivity trends).
Some judgement is unavoidable, but relying on judgement calls for binding forecasts invites intense scrutiny and questions about the basis for those constraints.
bsky.app/profile/gemm...
The approach underlying all OBR forecasting is now very far from the state of the art in macroeconomics.
Empirical evidence produced at the research frontier becomes less useful for forecasts - forcing the OBR to rely more on other sources, like Government produced figures.
This pressure is only going to intensify as governments have to make increasingly difficult choices on spending and taxation while trying to deliver structural reforms.
These affect long-term productivity growth, which the OBR’s toolkit is not designed to forecast.
OBR forecasts are increasingly contentious; not only do they reflect Government policy, they increasingly shape it.
The 2022 mini-budget fallout is the starkest example of the OBR’s impact.
A 🧵on the pressure this puts on the OBR to get things right 👇
To ensure new towns will be effective in realising their potential, we must learn from the mistakes made in the past. Read the full report (ukdayone.org/briefings/ne...) for more details and our action plan.
The locations we identified in the report offer good rail links, strong local economies, and underused land. For example, Taplow would allow for more than 20,000 homes being built in an area that would connect people to high-paying jobs.
