How to redesign the UK for growth
Just over a month into a new Government in the UK, and you can see what the Labour Party has inherited after 14 years of Conservative rule: a country with anaemic growth levels, broken public services, and very low trust in Government.
At the election at the beginning of July, voters opted for change. They gave the Labour Party a huge majority, one that will enable them to really change and reposition the UK as a competitive nation that delivers for all. Yet, after 14 years, what voters need to be aware of, especially as they’ve been conditioned to expect change now, is that change and an improvement in the quality of life will take time.
Yet, if you look at their election manifesto, read the briefings they’ve issued in the past month, and listen to the statements made in the House of Commons, well, you just might see a strategy for how they not only aim to govern but also work to redesign government and the country. With that in mind, the four to five years that they have are actually not that long, especially when voters are impatient to see and experience change.
So, what can the new Government do to improve how government works, and how can it help and support businesses to deliver the growth that will deliver the revenue with which it can rebuild and improve the public services that the country needs?
While they and the Exchequer currently do not have the money needed to deliver growth, what they do have is a blank piece of paper and a strategy that, if you connect the dots, you can the opportunities for business and society.
What has Labour inherited?
Let’s start by looking at what the new Labour Government has inherited. In summary, it is an economy with growth and productivity levels that have been anaemic compared to other G7 countries.
In 2023, the UK experienced a GDP growth of only 0.1%, making it the second lowest in the G7 (Full Fact). Moreover, the UK's economic recovery post-COVID-19 has been slower compared to most other G7 countries. While the UK saw a quarter-on-quarter GDP growth of 0.7% in early 2024, which was the highest among the G7 for that period, this short-term growth contrasts with its longer-term performance, where it lags behind countries like the US or nations in Asia (Full Fact).
In terms of productivity, the UK's performance has been underwhelming. Since the 2008 financial crisis, productivity growth in the UK has been notably slower. In 2022, the UK ranked fourth among G7 countries in GDP per hour worked, about 16% below the productivity levels of the US and Germany (House of Commons Library).
Investment in the UK has also been comparatively weak, with the UK's business investment performance being the lowest among G7 countries in 2022 (GOV.UK).
Despite some growth in specific sectors, such as low-carbon and renewable energy, overall business investment in the UK has lagged behind its peers (Office for National Statistics).
Speaking with businesses and their trade bodies and associations, you hear of a culture of short-termism because of limited incentives established for businesses. This is where UK government policy needs to be created to support innovation, productivity, and growth. The UK excels in innovation, an activity that needs to be supported so that it improves productivity, growth, and international influence.
So, how can the new government deliver change and reposition the UK?
Establish a mission-led and agile delivery culture across Government
The new government needs to establish a mission-driven culture and approach to government. It needs to focus on creating and aligning policies, actions, and resources towards achieving specific, clearly defined societal goals. The outcome is the delivery that they will be measured against.
This mission-driven approach, pioneered by Mariana Mazzucato and the UCL Institute for Innovation and Public Purpose, is a framework for addressing societal challenges through purposeful and collaborative approaches to innovation and public policy.
At its core, the framework focuses on:
Challenge-Oriented Missions: Instead of focusing solely on economic growth or narrow innovation goals, mission-driven strategies target broad societal challenges, such as climate change, healthcare, or inequality.
Cross-Sector Collaboration: Mazzucato advocates for collaboration between public institutions, private companies, academia, and civil society to achieve these missions. The idea is that solving complex societal challenges requires the resources, expertise, and perspectives of multiple sectors working together.
Public Purpose: The strategy emphasises the public purpose of innovation. This means that innovation should serve broader societal goals rather than just private interests. Governments are seen as key actors in setting the direction for innovation, ensuring it aligns with public needs and values.
Dynamic Public Sector: Mazzucato argues that the public sector should not be seen as a mere facilitator or regulator of private sector innovation. Instead, it should play a proactive and entrepreneurial role in driving innovation, taking risks, and shaping markets to achieve societal missions.
Inclusive Growth: Mission-driven strategies aim to ensure that the benefits of innovation are widely shared across society, contributing to inclusive growth. This involves designing policies that promote equity and social justice alongside economic development.
Delivering growth requires the government to think, design and deliver in an un-siloed manner that is strategic, integrated and collaborative.
As Mazucatto argues, it needs to work in a collaborative manner, both with stakeholders in and across government as well as with external partners. To ensure that this culture delivers it needs to adopt an Agile working environment, something that specific teams within government already use, namely Digital, Data and Technology (DDaT) teams.
When I joined the UK government in 2016 as a specialist, our DDaT team at the Department for International Trade (now the Department for Business and Trade) used this approach to design and deliver digital services.
Pioneered in the early 2000s, the Agile playbook helped many Silicon Valley companies to grow.
Work collaboratively with those who can support and benefit from the rebuilding of the nation.
The UK has a very professional civil service. Yet it has a waterfall culture and is very risk-averse.
During the last 8 years, it has become a political target by the various Conservative governments. Insight and expertise by civil servants have been publicly trashed because insight and data did not match the narratives that various conservative ministers wanted to promote.
Many stories have been shared with me that have left me aghast at the direction the country was being taken, regardless of what political or economic data said.
Time needs to be spent changing and improving the civil service culture. It is there to serve and has vast amounts of expertise, but it is stretched. It requires working collaboratively and openly, ensuring there is minimal duplication of services.
In a recent report, The Institute for Government outlined ‘20 ways to improve the civil service.’ Five of these focus on ‘opening the civil service up to external expertise and collaboration outside government.’ They focus on:
Advertising all civil service jobs externally by default
Creating more senior specialist roles in every department, which do not entail significant management responsibilities
Setting up large-scale secondment programmes in every department and ‘mission’ to facilitate higher levels of interchange with sectors outside UK government
Requiring each department to appoint an individual with the authority to establish multidisciplinary teams
The Labour Government is in the process of establishing a series of Mission Boards, potentially five of them, all answerable to No.10. The boards will be chaired by Prime Minister Keir Starmer and will include a mixture of government and external experts that can help create a culture of delivery. Think of the original Tony Blair delivery units, which were set-up in 2001.
As I understand, two of the five Mission Boards will focus on growth and investment, with announcements of the appointments to these being suggested for potentially before conference in September.
With one or two of these boards focusing on Growth, it would be worthwhile to expect close collaboration between the Treasury, the Department for Business and Trade, and other departments, potentially like the Department for Science, Technology, and Innovation.
Focus on what you can deliver in the short, medium and long term.
Honeymoons don’t last long. Look at the far-right riots, and you see a culture across UK society that is stretched. People are expecting change, and they are expecting it soon, which is why the new government needs to use a phased approach. It needs not just good news stories and headlines but the delivery of an improvement of experiences sooner rather than later.
With a mission-driven approach established, the government needs a strategy and policy that focuses on the delivery of growth that facilitates an improvement in day-to-day living - that is the measure!
Business needs the support of the government. It will be talking, lobbying even, to government. Yet there needs to be a culture of compromise where the government establishes incentives for the business community to invest in not just innovation that delivers in the medium and long-term.
The civil service will need to air the views of not just UK enterprise entities, but also small and medium companies (SMEs), who account for around 60% of the total employment and about 50% of the total turnover of the UK private sector.
As I have stated before, while the UK is 4th in the World Innovation Index, it drops to 11th in knowledge diffusion and 27th in knowledge absorption. Additionally, in the same index, the UK lags at 22nd place in Business Sophistication.
There needs to be a clear focus on changing and improving the investment culture in innovation, research and development. Companies that have a corporate venture capital (CVC) arm secure greater returns on their investment than those that invest directly and internally through their respective companies. CVCs are better vehicles for delivering innovation and growth to companies and the economy. Yet the UK CVC ecosystem lags behind that of the US and countries in Asia like Japan, South Korea and China, even though our academic environment.
Change isn’t easy, but with the new political leadership the civil service needs to be able to understand that with risk comes rewards and that by working with experts and specialists it will be better place to deliver the change that delivers growth for the UK and an improvement in the quality of life for its citizens.
This country has the potential to deliver. It just needs to be encouraged and incentivised. Business and growth await.
