“Workshop of the World” was a phrase used for England’s industrial prowess first coined by Disraeli in the House of Commons in 1838. A great deal has changed since and China has now become “the factory of the World” because it literally makes everything and makes it in abundance.
China has the advantage of cheap labour and low regulation, whilst the West has lost such benefits striving to improve the lifestyle of its citizens and it is instead shackled by wage pressures as a result of the higher inflationary environment making it virtually impossible for the West to compete with China on price. Therefore, the West has to continue on the well-trodden path of innovation through research and development (“R&D”).
America has just passed the “CHIPS and Science Act” in an attempt to catch up China’s investment within the semiconductor field. Both China and America are trying to wrestle away their economic dependency on Taiwan and South Korea, the two world players in semiconductors accounting for more than 82% of worldwide production of the same. This bold policy by America is aimed at recapturing ground in the ever-increasing battle to attract more lucrative and highly skilled job creation and inward investment, which drives all industrial economies.
The irony is that the silicon chip was invented in America as far back as 1958, yet it allowed its innovation to be squandered and instead be taken up by South Korea who used the tried and tested formula of R&D to become the world leader in technological innovation through a simple strategy of collaboration between government, industry and academia.
Sceptics may say that America has come to the party too late as China has already started down this road with its “Made in China 2025” programme which has seen China seize dominance in areas such as semiconductors, 5G and AI. Even Europe whilst very slow to move direction has made a start through the “Europeans Chips Act” aimed at attracting talent and investment into Europe for these new cutting edge technologies.
It is important for Government policy for the next UK Prime Minister to not focus on re-election policies of tax cuts and short term giveaway measures in order to increase their poll rating for re-election for 2024/2025, but instead, focus policy on strategies of investment to continue to attract foreign investment into the UK.
Tony Blair will be remembered for his mantra of “education, education, education” and the message to the next Prime Minister and UK PLC is “investment, investment, investment” so that the UK can continue to strive for the productivity gains that it deserves and that will be demanded if the economy is to curb the inflationary cycle and dampen down wage inflation. Then the next Prime Minister may be remembered for overseeing a new golden age for UK PLC through innovation especially given the backdrop of the Bank of England’s prediction that the UK will be in recession from Autumn of this year until at least 2024
