Fund tech revolution, Bank chief tells Chancellor

Sep 19, 2020

Fund tech revolution, Bank of England chief tells Chancellor: Andy Haldane seeks tax boost for firms that make economy ‘faster and smarter’

  • Haldane – writing in his capacity as chairman of the Industrial Strategy Council – said a new blueprint must be drawn up 
  • The surprise intervention – in a joint document by Haldane and Sir Charlie Mayfield – comes ahead of an expected Spending Review by Rishi Sunak

Britain’s top economist has called on the Government to spearhead a tech revolution for millions of firms, creating a ‘faster and smarter’ economy as the country fights its way back from the Covid-19 crisis.

Bank of England chief economist Andy Haldane – writing in his capacity as chairman of the Industrial Strategy Council – said a new blueprint must be drawn up with a raft of measures, including tax incentives and access to finance to feed an ‘appetite’ among firms to adopt new technology. 

The surprise intervention – in a joint document prepared for The Mail on Sunday by Haldane and former John Lewis Partnership chairman Sir Charlie Mayfield – comes just weeks ahead of an expected Spending Review by Chancellor Rishi Sunak. 

Plea: Andy Haldane is calling on Rishi Sunak to draft a new blueprint for the economy

Plea: Andy Haldane is calling on Rishi Sunak to draft a new blueprint for the economy

It is unusual for a senior official who also holds a high-ranking position at the Bank of England to make such broad-reaching policy recommendations. 

Haldane, who sits on the Bank’s Monetary Policy Committee, and Mayfield want small and medium-sized companies to urgently adopt or update software across key areas such as accounting, HR, customer relationship management and marketing. 

The paper says the economic recovery in July was ‘further and faster than anyone expected’ after the collapse in the second quarter. 

But the writers say it is vital to seize ‘the opportunities, as well as the obvious challenges, of Covid’ and ‘technologically upgrade our businesses and our economy’. 

UK business has been a ‘laggard’ in adopting new technology despite playing ‘a leading role’ in developing it, the paper says. ‘That is particularly true among the smaller and mid-sized businesses which employ nearly two thirds of people working in the UK. This explains why, despite rapid innovation, aggregate productivity among UK companies has flat lined for more than a decade.’ Haldane and Mayfield add: ‘Technology adoption needs to be at the heart of industrial policy. Levelling up the UK’s companies, through improved tech adoption, is an essential element of levelling up our regions.’ 

The paper – which the MoS has made available in full at thisismoney.co.uk – calls for ‘incentives for companies to make the right investment choices’ and to make it easier for them ‘to access finance to fund this investment’. 

It also calls for support through advice shared by large corporations with smaller firms, through local ‘tech hubs’ and online. A survey of 500 small and medium firms released alongside the paper reveals one in eight are using systems more than a decade old and another third using systems six to ten years old. A third said they have acquired technology that has barely been used. 

But the paper says the Covid crisis has presented a major opportunity because ‘rapid and radical technological adoption has been essential to the survival of many firms’. 

Mayfield chairs Be The Business, a Government-backed organisation set up to solve Britain’s sluggish productivity largely by encouraging wider use of technology. 

Its research has revealed adoption of new technology among businesses rose four times faster during the crisis than it did for the entirety of 2019. In many cases, firms were forced to act as they switched to working from home. Mayfield said last night: ‘Business technology has not kept pace with consumer technology. It’s not just about Zoom and it’s not about AI and advanced technology. 

‘It’s about wider adoption of pretty well-established tools that have been proven to improve growth of businesses that use them – accounting and HR software, CRM [customer relationship management] systems, online trading, export tools and really getting to grips with social media and marketing.’ 

But there had been resistance in the past from firms fearful of the disruption that implementing new technology can cause. ‘It’s hard work and it’s difficult,’ he said.

Referring to John Lewis’s experiences implementing new IT systems since 2014, Mayfield said: ‘I have the scars on my back from a well-resourced business that has found tech adoption difficult. It costs a lot, took longer than planned and at the end of it all the benefits weren’t quite as clear as they were at the beginning.’ 

‘But I’ve no doubt we did the right thing. If we hadn’t, the business would be in a far worse position than if it hadn’t,’ added Mayfield, who left John Lewis earlier this year. 

He said Be The Business was piloting ‘tech adoption labs’ across the country and large companies had offered ‘chief technology officers on demand’ to help firms cope.

‘We’ve got the template, we’ve got the playbook, we’ve got Britain’s best businesses and access to expertise – Cisco, Openreach, Amazon, Google. We are asking the Government to make this a priority for rebuilding the UK.’ 

He added: ‘Eat Out to Help Out has had a pretty dramatic impact on restaurants. What we need is a similar message for business leaders, something along the lines of ‘Tech Up to Grow Out’. It should become a fundamental part of the recovery.’ 

HOW DO GOVERNMENTS AND BUSINESSES ENSURE BOUNCE-BACK CONTINUES?

By Andy Haldane, chair of the Industrial Strategy Council, and Sir Charlie Mayfield, chair of Be The Business 

UK GDP had, by July, recovered around half of its Covid-related losses, rebounding further and faster than anyone expected. That’s the good news. The bad is that the economy remains 12 per cent smaller than at the start of the year. So how do Governments and businesses ensure this bounce-back continues and that the opportunities, as well as the obvious challenges, of Covid are seized?

A large part of the answer lies in improving levels of technology adoption among businesses. While the UK plays a leading role in developing new technology and innovation, it is a laggard when it comes to its wider adoption across companies. That is particularly true among the smaller and mid-sized businesses which employ nearly two thirds of people working in the UK. This explains why, despite rapid innovation, aggregate productivity among UK companies has flat-lined for more than a decade.

Yet, for all its challenges, Covid has shown what is possible on this front. With their normal business models disrupted so significantly, rapid and radical technological adoption has been essential to the survival of many firms. Even among the more mature aspects of technology, such as e-commerce, the pace of adoption has been rapid. Data from Be the Business shows tech adoption was four times faster during the crisis than the whole of 2019.

It is good news that many more businesses now have the appetite and experience to upgrade their technologies. The less good news is that many of the barriers to that wider adoption are long-standing and remain deep-seated. Understanding those barriers, and removing them, is crucial if the benefits of technology – for productivity, skills and jobs across every region – are to be unleashed.

Be the Business, with support from McKinsey, has just completed the largest-ever study of these barriers and opportunities to widespread adoption of technologies. Some of these blockages sit in firms themselves, through a lack of information or appetite for change. Others exist among the suppliers of technology, in particular to smaller companies. Both the demand and supply sides need fixing, at source and at speed, if the opportunity is to be seized.

To do so, we believe three things are essential.

First, businesses need access to independent advice and resources to guide them towards the right technology choices. At present, in particular for smaller companies, this is daunting. There are mountains of information and training available on how to use specific software and tools. But there is no one-stop-shop for this information and no clear guidance to help businesses understand what kit would best meet their needs – until now.

On the new website, Be the Business Digital, businesses have all the answers they need. It is full of real world experience of business leaders who have learnt the hard way about tech adoption – where they went wrong, why they persevered, and what it did for their businesses. It’s constantly being updated and developed, providing a guide to the many business leaders up and down the country who know they need more tech but aren’t sure where to start.

Second, business leaders themselves need access to expertise and training. Only big firms have Chief Technology Officers. Most businesses can’t afford them and nor can they afford the fees of professional service firms who might fill the gap. We need, in every region and major town or city, a place where businesses can come for help when they need it – local hubs for business support. This should not just be government provided support. The private sector must play a role here. More than 100 of the UK’s best firms, including our best tech companies, have already committed to supporting Be the Business’ efforts.

Finally, there is the role of policy. Technology adoption needs to be at the heart of industrial policy. Levelling-up the UK’s companies, through improved tech adoption, is an essential element of levelling-up our regions. That means creating incentives for companies to make the right investment choices – for example, with a level playing field between investing in machinery versus software.

It also means making it easier for businesses to access finance to fund this investment. The UK has led the world with its Open Banking initiative to make personal bank account data portable, enabling people to switch their accounts cheaply and easily to improve innovation and competition. There is a strong case for doing the same with business data, making this fully portable and thereby enabling companies to switch vendors easily and cheaply to unleash finance and innovation.

The Nobel Prize winning economist Robert Solow famously asked: if technology is so ubiquitous, why doesn’t it show up in productivity statistics? We now know why: much of that technology simply isn’t found in many British businesses. Now is the time to technologically upgrade our businesses and our economy, building back not just better, but faster and smarter.

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