Given today’s high-profile CBI conference, it seems an opportune moment to ask a fundamental question about the British economy which follows from two basic facts about the current economic situation. These facts are these: First, we have a weak pound, which makes British exports relatively more competitive. Second, the fabled BRIC economies are showing their resilience by leading the charge towards global economic recovery. So, the basic question: How can the British economy take advantage of the weak pound and enjoy a British economic recovery based on strong export growth? What can we produce that the likes of Brazil, Russia, India and China, as well as the developed world economies, want?
The rise of the BRICs means that we need to give new consideration to where exactly our comparative advantage now lies. But the latest figures suggest that the British retain more of an appetite for spending than talents for producing. This brings welcome reassurance that British consumers now feel confident enough to start spending again, but suggests that, in spite of the pick-up which the weak pound provides, we seem set to return to the habits which have had us be amongst the surplus economies in the global imbalances that have been one of the characteristics of recent years.
Increased British exports would aid prospects for jobs and growth in the UK, while also going some way to correcting for these global imbalances which are one of the underlying drivers of the financial crisis. We need innovative and imaginative solutions to this challenge, which the British economy confronts in the context of a world in which political and economic power is shifting ever more from west to east; from non-BRIC to BRIC. As is so often the case, there are opportunities as well as threats contained in this shift, particularly for the British businesses able to provide the nouveau riche of the BRIC middle classes with the goods to suit their newly affluent and aspirant tastes.