Here’s your starter for ten: what is Australia’s third largest export industry, behind coal and iron ore? The answer is education, which contributes the equivalent of around £11 billion a year in foreign exchange earnings, mostly fees from Asian students in Australian colleges. Even during the great commodity boom, education earnings have grown faster than exports as a whole. All those foreign students are also a boost to tourism, because families like to visit; and a diaspora of two million graduates of Australian institutions is a benefit to trade and diplomacy as well as a guarantee that the education income stream is unlikely to run dry for many years to come.
The UK has three times the population of Australia and 1.7 times the economic output. Our education export earnings for 2008-9, according to research commissioned by the Department of Business, Innovation and Skills, were £14 billion. Not bad, but you might still conclude that this is a sector in which we’re underperforming, despite obvious historic advantages. You won’t hear the subject discussed in those terms, however, because unlike the Aussies we don’t officially regard selling knowledge to non-Brits as an export sector at all. Rather, we see it as an immigration threat — hence the UK Border Agency’s attempt to deport the entire foreign student population of London Metropolitan University — and a potential theft of intellectual property by Chinese cadres at Cambridge and Imperial College London, who are plotting to take our science home with them and use it to wipe out our high-tech industries.
It’s time for a change of national attitude on this one. I found myself recently in the London office of the architects HOK looking at a model of Haileybury Almaty, one of two outposts in Kazakhstan of the famous Hertfordshire public school. It struck me as a perfect example of Britain’s cultural strong suit in the global economy. Selling British learning to the world, whether in commerce courses for Nigerians in London or Grade Three flute exams in Singapore, is a good thing. Barring blatant abuse of the system, we should take Australia’s lead and embrace foreigners who want to study here, not persecute them because college registrations make them so much easier to collar than the immigrants we really don’t want. If the reshuffle isn’t finished yet, BIS should be given a minister for education exports.
Touch and go
Mixed signals everywhere, as the nation slowly shakes off holiday languor and Olympic distraction. My man on the forecourt in the Home Counties motor trade says, ‘No one I know seems to be doing any business at all’. The Today programme tells us a third of all the shop space in Nottingham is vacant. Yet further north, where conditions should be even worse, I see new business openings, dead building sites coming back to life, and consumers with more cash to spend. The manufacturers’ organisation EEF has just issued its gloomiest bulletin for three years, forecasting a 1.5 per cent drop in factory output this year — yet the slowdown eased sharply in August, with the Markit purchasing managers’ index registering 49.5: below 50 indicates contraction, but July’s figure was 45.2 and no one predicted such a big improvement.
Then comes a chilling analysis of UK export data from Citi Economics. Despite hopes of an export-led recovery boosted by a more competitive pound, our performance has lately been somewhat less than Olympian; in fact, to use a technical expression, it’s been pants. We’ve been underperforming in all the places that matter: Switzerland, a quarter of our size, exports more to China than we do; and while Germany exports eight times as much to the high-growth Bric countries (Brazil, Russia, India, China) as it does to bankrupt Greece, Portugal and Ireland, the comparable multiple for the UK is only 1.3 times.
Hidden in both the export figures and the recent apparent fall in UK productivity (signalled by the contrast between negative growth and rising job numbers) is a shrinkage of activity in the financial services sector, which had become such a bloated element of our economy. On balance that’s healthy for the long term, but other sectors are not yet growing to fill the gap. George Osborne, we gather, is about to attack this issue, as well as that of his own fast-evaporating credibility, by promoting a flurry of housebuilding and a ‘small business bank’. Every little helps, but such measures will take a year or two to bite — and (at risk of repeating myself while sounding like David Davis) it’s more important to bring forward quick-acting tax and employment-law measures to boost the smaller businesses and entrepreneurs who are clinging to optimism, bucking trends and creating jobs. Today’s doom-deniers will be tomorrow’s export champions.
The oligarchs’ club
It’s no good being too fastidious about Russian billionaires bidding up prime London property (now 50 per cent higher than in March 2009) and clogging our courts with their claims against each other. But the cases of Berezovsky vs Abramovich and (still to reach its denouement) Deripaska vs –Cherney remind us of an uncontestable fact: that the emergence of Russia’s oligarch class is a black stain on capitalism and a blight on their own country’s economic development. Since March 1995, when a clique led by Vladimir Potanin secured control of 44 major state companies at knockdown prices in exchange for loans to keep the Yeltsin administration from bankruptcy, two or three dozen oligarchs have amassed huge concentrations of wealth and market power while acting as a bulwark against shareholder rights, contract law, foreign investor confidence, innovation and good government. Their corrosive influence makes Putin’s Russia more dangerous in world affairs. The smiling Roman Abramovich may be, in Mrs Justice Gloster’s judgement, ‘truthful and on the whole reliable’, but he’s a paid-up member of a very unpleasant club.