Brexit bounce can turn untapped brilliance into success

Finally, it seems, Brexit is done . The sight of Rishi Sunak selling his deal with the EU in Belfast, and the clear rapport between him and Ursula von der Leyen, the bloc's President, as they unveiled the Windsor Framework looked like steps, at last, to draw the Brexit rows and impasse to a close. It’s almost seven years since the EU referendum (seven years!) and in that time, it’s as if Britain has stood still. Now, can we please get on with strengthening our economy and ensuring the UK is in the best shape for the future? Once, we led the world in so many industries . Not any more. Today, we’re able to make a case for being main contenders in a few, but beyond that, if we’re honest — and unfortunately many of our politicians and media are not — we lag behind. While we’ve been diverted by arguments over Europe, much investment has stood still due to the lack of certainty. Meanwhile, there’s been a marked sense of the rest of the world getting on with it and pulling away. With Brexit out of the way, there is no longer any excuse. We need to catch up, indeed attempt to overtake, and fast. One area where we must make a quick advance is semiconductors. It’s shameful that the UK is the most expensive country in the world in which to manufacture this essential 21st century product. Scott White, chief executive of Cambridge semiconductor maker Pragmatic, said recently: “At the moment, it’s effectively far cheaper for us to go build our next fabrication line anywhere else in the world, other than the UK — because there are government support programmes in the US, EU, China, Taiwan and pretty much any other country in the world.” White says a “level playing field” with competitor nations is essential if the government wants to grow computer chip manufacturing beyond R&D. It’s true that in the UK, thanks to our universities and strong scientific base, we excel at innovation and at early-stage development. After that, we wane, as often the potential world-beating star moves elsewhere, lured by bigger inducements and greater enthusiasm. White’s fear is echoed by MPs. They’ve warned that we urgently require a semiconductor strategy. or we can face an exodus of companies in what should be one of our fastest-growing sectors. “Countries across the globe have grasped the importance of securing semiconductor supply chains for their futures, why haven’t we?" asked Darren Jones, chairman of the House of Commons business, energy and industrial strategy committee. "While others race ahead, ploughing billions into setting up [microchip manufacturing plants] or industry support, we’re not even at the starting line.” The world’s wake-up call came with the pandemic, when semiconductors were suddenly in short supply and their price climbed accordingly. Since then, the continuing tension between China and Taiwan, the number one centre for high-end chip manufacturing, has made nations realise they must build their own industries, and quickly. In the US, the White House has passed legislation paving the way for an injection of $70 billion into producing semiconductors. The EU is boosting chip-making in its member countries. South Korea has set itself the target of being world number one by 2030. Not to be outdone, neighbouring Japan is pumping billions into its industry. Meanwhile, predictably, China intends to outgun everyone, with a $100 billion investment programme. In the Netherlands, ASML, which makes the machine that produces the most advanced computer chips — the only one of its kind in the world — has become Europe’s most valuable tech firm, worth $22 billion. We should be striving here to emulate that in the UK. We’ve got the scientific know-how, what our developers need is wholesale support. The problem, as ever, for a cash-strapped UK government is the lack of funds available for financial assistance. Fortunately, a new report suggests it’s not only about the money, that large-scale public cash injections are not required. Cashing in our Chips by Gerard B Lyons (not the economist, that’s his father) says the UK can support its semiconductor industry without entering into a “subsidy arms race”. Produced for the Centre for Policy Studies, Lyons’s analysis advocates that the UK play to its strengths rather than try to emulate the money-chucking strategies of others. Subsidies can prove to be inefficient and are not necessarily the best weapon. There is a tendency to assume that hard cash is the only solution when there are other ways of providing assistance. “The US and EU, among others, have put their cards on the table with their subsidy arms race, but a market-led, investment-friendly, approach is the ace Britain can — and should only — play to support our fledgling domestic semiconductor sector,” Lyons says. He suggests the use of tax and investment incentives for high-intensity R&D industries. Typically, the UK had previously implemented a tax credit system for R&D, only for the government to narrow the eligibility and scope of the policy. There should be an emerging technologies strategic investment fund, set up and managed by the British Business Bank to aim for likely winners. We should drop the raising of immigration barriers to allow the admission of skilled high-tech workers. There is the tech visa scheme, created to encourage tech workers to move to the UK, but again, the start-up that operates the scheme has lost its government funding. Britain is in a better position than it realises. We lead the world at the beginning of the industrial process, in R&D. It’s what comes later where we lose out. Similarly, we’re at the forefront of AI, quantum computing and life sciences. We must turn this brilliance into underpinning our economy and producing powerhouses like the Netherlands’ ASML. It’s not beyond us, but it’s not a given either. We have to put the effort in. There is plenty to aim for; hopefully, with Brexit done, minds will at last concentrate and we can make rapid progress.