Industrial Indecisiveness lets Inequality Deepen

The Chief Executive of the UK’s largest institutional investor spoke to the BBC today about the UK’s uneven economic growth, how this has created damaging and divisive inequality and why he favours infrastructure-focused government industrial policy as a solution.

There are already a large number of economists and other commentators calling for the government to take adopt an industrial policy that would rebalance the UK economy away from its over-reliance on the financial sector and other parts of the service sector which have been an engine of gross income inequality. Legal and General’s intervention shows that the financial sector itself recognises the benefits of such a policy.

One of the benefits of an industrial policy such as the L&G’s Nigel Wilson describes is that it would create large numbers of skilled jobs that pay decent wages. This is sorely needed. OECD figures show that the current UK workforce has one of the highest proportions of low-skilled, low-paid workers in the developed world. This workforce structure keeps many workers stuck in jobs which offer little or no prospect of promotion and which are paid at levels which make people over-dependent on social security and unable to consume enough to drive growth without resorting to debt.

A well-planned industrial strategy could also reduce the regional inequality that threatens to split the UK into an economy divided between rich and poor regions with conflicting political priorities, in which governments will find it impossible to achieve consensus. It is notable that Nigel Wilson was sceptical about HS2, which some see as another route by which wealth will flow to London, but was enthusiastic aboutNorthern Hub schemes to build capacity within the north.

Wise people in financial services know that the strength of their sector depends on the strength of others. Finance is a globalised business, but the major UK institutional investors disproportionate invest in assets in their own territories, so they need sustainable, high-value businesses, which in turn need modern infrastructure and skills to draw upon.

As Nigel Wilson said, there is not a shortage of money for this: investors are ready to invest, all we need is that the Government adopts a strategy for giving the UK what it needs to have the profitable, high-value industries and well-paid, skilled jobs that we need.

Duncan Exley, Director of the Equality Trust