How A Business-Friendly Climate Can Spur UK Growth

Loosening regulations, incentivizing green investment, and fostering AI adoption can revive the economy, says economist Dambisa Moyo

Baroness Dambisa Moyo and Huw van Steenis

How do we find growth and manage it successfully? That’s arguably the biggest question facing UK corporate leaders and policymakers as the economy struggles to sustain a durable recovery in the post-pandemic period.

We gathered senior leaders from the public and private sectors on June 6, 2023, to consider the growth question. In a conversation with Oliver Wyman Vice Chair Huw van Steenis, (Baroness) Dr Dambisa Moyo provided a variety of provocative ideas gained through her work as an economist, author, and board member of a number of multinational companies. Here are a few of our key takeaways:

  • History tells us why reviving growth is imperative. The latter half of the 20th century saw decades of rapid growth, increasing globalization, and the ascendance of vibrant private-sector companies akin to the Gilded Age at the end of the 19th century. But just as that earlier period of prosperity gave way to a world war, a global pandemic and the Great Depression, so has our world experienced similar shocks since the global financial crisis of 2008-2009. Without concerted efforts to revive our economic engines, we run the risk of a prolonged period of slow growth, stunted individual aspirations, and rising social and geopolitical tensions.
  • Britain needs to rediscover the formula for economic success. Dambisa recounted how she prepared for her first speech in the House of Lords earlier this year by reviewing Hansard to see how pre-eminent economists had advised the house over the past century; she found that much of what she had hoped to say about the imperative of growth and how to achieve it had already been said. Essentially, government and business need to execute on tried-and-true strategies to deliver growth. That starts with creating a business-friendly environment that attracts investment and spurs productivity growth. The government also should move faster to make the most of Brexit by reducing regulation, being mindful of how countries like Ireland and even France are rolling out the red carpet for entrepreneurs. Britain also could use an ambitious, broad-based growth strategy, such as providing first-loss protection to spur investment in clean technology and artificial intelligence (AI), even if the country’s fiscal constraints prevent it from matching the scale of America’s green energy incentives. 
  • A growing rift with China poses dangers for the West and business. China has spurred global growth for the past 40 years, attracted massive inflows of foreign capital, and become the world’s largest trading partner, lender and investor today. But growing tension and trade barriers between the US and China are creating a more-siloed world that threatens to slow growth and increase costs. Companies running global businesses with a big footprint in China are struggling to straddle that divide and may need to consider more decentralized governance structures that mirror a fracturing global economy. Moreover, the aggressive sanctions against Russia over the war in Ukraine is promoting closer ties between China, Russia, and oil-rich Gulf countries, and could potentially weaken the dollar’s status as a global reserve currency. Interestingly, the discussion highlighted that while the focus is often on risk of overt military conflict with Taiwan, we should be mindful of other routes to influence such as via the China-friendly Kuomintang party ahead of Taiwan’s January 2024 elections.
  • The green energy transition needs some brown. Everyone has a big stake in combatting the effects of climate change across the business landscape. But governments and companies need to be pragmatic, not dogmatic, to promote the transition. Investment continues to ramp up in solar and wind power as well as battery, geothermal, and nuclear generation IV, but many alternative energy sources don’t yet produce returns that meet the cost of capital. The world consumes around 100 million barrels of oil a day currently and can’t shut that off overnight. We need a diverse portfolio of energy sources to get us through the transition, and hydrocarbons will be a big part of the mix for some time to come. Efforts to steer finance away from conventional energy businesses risk driving more of them out of public markets and into the hands of private investors, reducing transparency and depriving pension funds and other investors of returns.
  • AI’s disruption may come where we least expect it. Through her company boardroom experiences and recent conversations with leaders in AI development and deployment, Dambisa feels the current consensus is that AI will destroy more jobs than it creates, which could prompt governments to consider everything from adopting universal basic income policies to raising taxes on the wealthy. But productivity has been declining for most of the past two decades even as the pace of technological change has accelerated. It’s not yet clear that AI will change that pattern. Business can’t afford to wait for an answer, though. They face pressure to adopt a technology that could be the great differentiator in tomorrow’s economy. AI also may foster the growth of startups and enable them to scale with fewer people and less capital than previous generations. If true, that could threaten the business model of venture capital firms that have been driving change for decades.