How to foster growth in an infertile environment: Three key tips from economist Will Hutton

Businesses and the economic development professionals that support them are operating in an unfriendly environment, economist and journalist Will Hutton told delegates at today's Institute of Economic Development annual conference in London.

Will Hutton speaking at the IED Annual Conference yesterday
Will Hutton speaking at the IED Annual Conference yesterday

Former Observer editor Hutton is now principal of Hertford College at Oxford University and chair of the Work Foundation's Big Innovation Centre.

Business investment has dropped pretty consistently since 2001, he said, stymied partly by uncertainty about existing business models and technological change. Cost of capital to businesses is perhaps the biggest challenge the country faces, he added. "Until we get the cost of capital down to the level of most of the rest of the world we will be fighting with one hand tied behind our backs," he said.

Helping innovative businesses to thrive in these difficult circumstances is essential to maintaining employment as the century progresses, he argued, citing research that says that 47 per cent of existing jobs in the US will disappear in the next two decades.

Here are three key pieces of advice he gave to local economic development agencies about how they could do that.

1. Focus on the parts of the economy that are likely to grow. Hutton said investment in "intangibles", essentially knowledge-based assets such as patents, algorithms or brands, was now greater than in tangible assets such as buildings or machinery. "If you are trying to stimulate investment, infrastructure is yesterday's story," he said.

"The real value is in intangibles. You need to know who is writing code in your area". He also advised economic development bodies to focus on 21st century "general purpose technologies". These are technologies that have a transformative effect on sectors other than their own, and have the potential within themselves for significant evolution - the classic 20th century example was the internal combustion engine. History had shown that the rate at which these GPTs emerge is constantly accelerating. "We can expect 20 GPTs in the 21st century," he said, with early examples being the mobile phone, nanotechnology and digitisation.

2. Identify innovators in those growth areas. "You need to know who the top 50 innovators in your area are, and have a strategy to help them scale up," he said. Organisations such as the Big Innovation Centre and the public-private "catapults" that aim to build high growth businesses on the back of academic research and new technology would be able to help local economic development bodies to do this, he said.

3. Help to de-risk growth for those innovators. "It's about triggering the growth of local ecosystems that will help people manage risk," he said. Strategies to do this could include making available cheap land, housing or business space, fostering local banks (perhaps partly supported by local government) to be patient investors and helping companies import talent.

"None of this requires that much money," he said. "It just requires imagination and local leadership".

The IED Annual Conference was staged in association with Planning and Placemaking Resource. It was sponsored by Nathaniel Lichfield & Partners, Grant Thornton, YKTO Group, Tractivity and WECD.

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