A hole in our economy – protecting critical supplies

Over the past few years we have suffered unforeseen breakdowns in global supply chains – covid, limited access through the Red Sea and Suez canal, piracy and war zones. In parallel there has been a steady unwinding of trade globalisation as tariffs and bureaucratic barriers to easy movement of goods have grown. Particular examples include the Trump administration’s policy of repatriating manufacturing jobs back from China (a policy continued through the Biden presidency), Brexit and the introduction of Western sanctions against Russia and Iran.

In the UK (unlike the US which has implemented a set of co-ordinated incentives to grow key sectors of the home economy) our government through this period has prioritised internal squabbling over supporting our economy. A Labour government must prioritise mending the holes in our supply chains if it wishes to achieve its aims for economic growth.

Whilst many critical supplies have been identified over time (typically following a short term supply crisis) and security of sourcing investigated at the time, we have collectively forgotten to keep checking that this security continues. For example, in some cases knowing that a long term source within the EU has been identified had resolved the matter – we know now, from Covid experience, how the UK has to queue behind EU members for controlled supplies and that we must re-address essential items domestically. Far from ‘taking back control’ we have become exposed to all kinds of potential shortages, surrendering any supply priority in the event of global shortages.

There is an urgent need to identify key weaknesses in self sufficiency in the UK – those goods and services which are essential and critical elements of our economy and where we should not have to rely on external supplies always being available. Health, climate change and above all geopolitics will all surely generate severe shortages of different kinds over time.

These critical items cut across many sectors. Apart from the obvious (military and key infrastructure components for communications, water and power supply) there are medicines and medical supplies (have we followed through on what we learned from Covid?); food ingredients (for example, a recent carbon dioxide gas shortage) as well as strategically important supplies critical to the support of very many interconnected jobs (such as EV batteries). 

Ideally, there needs to be a formally appointed body to identify protected supplies subsequently co-ordinating and monitoring progress.

Each identified item will need a carefully thought through, tailored solution with access to a toolkit of incentives ranging through co-ordinated nudging, tax incentives, grants and direct investment.

Lessons learned from the water and power supply sectors (which could be included as protected supplies) need to be applied.  Making any tax break or funding dependent on continuing supplies, enforced controls on extracting cash and the threat of confiscation without compensation or payment of debt would shift the focus to responsible long term ownership. Overseas ownership would be welcome but needs real commitment guarantees. Regular review could ensure that the list of protected supplies is trimmed once there are multiple sources of stable supply or where a product is no longer critical.

Multiple supply solutions will ensure competition and better protection of supply. Co-ordination with regional grant policy could target the benefits of stable, long term employment prospects.

For some key strategic development the better option could be funding of research through grants for research and proof of concept. The science behind battery technology, for example, tells us that the sector can be expected to move on from a total reliance on lithium. Other competitive technologies are emerging including sodium based cells which, though heavier, could provide more planet friendly and cheaper solutions, particularly useful in levelling out supply based on sun or wind. Relying on a single technology will miss the next phases of development.

This is not a call for massive funding or heavy intervention from central government.  It is for common sense recognition of the huge benefits of anticipating likely events, encouraging advance planning to pre-empt structural crises. To be effective in the long run Labour must set up a system for responsible monitoring of the effectiveness of this policy with sufficient influence or power to highlight failures and push for improvement.

These policies offer a win-win-win combination for the UK economy, reinstating some of those elements now gone missing but essential as part of the coherent basis of any industrialised country:

  • more jobs created and kept within the UK offering stable, long term employment
  • more security of supply so fewer unplanned hiccups with widespread, damaging consequences
  • minimal cost offset by the significant taxation increase as these functions return to our own economy

The global supply chain is vulnerable to immense change. A Labour government must urgently identify any weaknesses in our self sufficiency in order to safeguard and succour the UK economy.

 

To read more about the threats and challenges facing the UK, see Connectivity Conflicts and the Contest for Cyberpower: On the Age of Unpeace.