 Fy enw i, ac yn ddod, a'i ddaw'n drafodol fyddyn nhw'n mwyaf iawn. Mae'n ddod ar y cyfo- yelledais Rhyw Roge a gyrsynol felly yn gwneud yn Brit, ac mae'r hynny'n ei bwysig. Mae'n ddod ac mae'n ddod o'r hynny, ddiddordeb! Mi'n ddod i'ch bod wedi'ch gweithio i ni ddim yn gothwynt gwahanol. Ac mae'n amlwg o'i ddydigawr, yw'n ei wneud yn mwyaf wedi cael i dw i ddweud y diwethaf. yn rhan o gyfan, rydych yn boost yn argyrchwmpio. Ac mae'r cyfreithio yn rhan o'r cyfreithio, when the CBI conferences really did go on and on, with Troopup to Harrogate or Birmingham. I always thought it was amazing that business people could get the time of work to go to them, but in fact they didn't really go to them. It was just the public affairs guys and the lobbyists. Those conferences were, of course, in the old days, when, if I remember correctly, was lobbying for Britain to join the Euro. As indeed, incidentally, were the members in the CBI polls, how things changed and my goodness how much they've changed since 2007. Now I don't think you should be embarrassed about your support for the Euro. It's been a very long few years and most of us have been forced to change our minds about lots of things. I'm the guy who wrote in 2005. I wrote a piece for BBC online saying, I don't expect we'll see a banking crisis. Now as a matter of fact, I consider myself quite foresighted to have known that such things as banking crises occur, which the banks had evidently overlooked. But what I think has happened since 2007 is we've arrived at a unique and very significant turning point in our history. The Chinese have that ancient curse, may you live in interesting times, and by interesting they mean crap. And our times are interesting in the Chinese sense of the word, but actually they're also interesting in the ordinary sense of the word. It's truly a turning point in all sorts of ways. And my view at least as big a deal as 1989, the fall of the Berlin Wall or 1979 in this country, the fall of the unions one might say. We have the spread of economic power from the old developed world to a far larger community of nations. We have an intellectual shift as we understand that some of the things that we took as a red were in fact wrong. We've seen a bonfire of intellectual constructs and theories. The efficient markets hypothesis is perhaps the most obvious, the economic theory that in the financial markets the price is right. A company is worth what the market says it's worth or the value of a bond is what the market says it is. We've seen markets make mistakes as big as those of politicians, business people or even journalists. And it's not just an intellectual turning point. Grand plans of the last few years are going to arrive from the creation of a vast single currency to the creation of giant global banks. A bonfire of vanity projects one might say of the last 15 years. And my own view is that if you haven't changed your mind or had reason to look at what you said five years ago about things and say oh I got that wrong or I got this wrong, if you haven't done that then you probably haven't been thinking hard enough about what's been going on. And what I want to do for the next few minutes is just reflect on another great issue in this turning point entirely related to the others that I've mentioned which is the turning point in the economic direction of the UK. And this has really been the subject of the conference today, renewing Britain's place as a trading nation, taking a new turn to export led growth and hopefully exporting to the dwindling number of nations who can afford to buy things. Now my view is that this has been your most important conference for many, many years. Our economy is at the end of one phase and at the moment it is striving and struggling to find another. Our nation's business model has evolved a lot in recent decades and now it has to shift and find a new direction. And I want to reflect on what has happened, the obvious shortcomings of that model which have been exposed. And the truth is there is good news and bad news and first the good news about what our economy has been through over the last 20 or 30 years. We've been something of a pioneer, we were a pioneer of course when it came to industrialisation but we've also been a pioneer in deindustrialisation. No one in all honesty has made a better fist of it than we have. We have moved up market. We've chosen industries in which we felt we had a comparative advantage. Industries in which the China's of the world could not compete with us successfully and we have moved into those industries with gusto. A wave for example from bog standard manufacturing to more elite, niche and lucrative businesses. And in the series made in Britain, which was kind of referred to earlier, I've essentially documented the sorts of areas in which we've moved up market manufacturing. A wave for example from what one might call bog standard bikes towards things like the Brompton bike, the elegantly engineered fold up bike made over in Brentford. Away from t-shirts towards jet engines, up market manufacturing. We've moved towards industries also that rely on intellectual property that are based on it. Industries based on science at one end to artistic creativity on the other from the magic of pharmaceuticals to the magic of Harry Potter. And we've also moved and made a pretty sterling attempt to get into commercial services. The professionals, many of whom are here who weren't so much building this ecosystem particularly around the capital, particularly in London, picking up crumbs by selling services to foreigners. And if there's one industry in which I think we should all be particularly proud, one industry that gets to the heart of these three areas, up market manufacturing, intellectual property industries, based industries and services. And one industry that gets to all of them, it's our universities. Universities which are themselves a big export industry, a service export, create intellectual property and particularly deploy that intellectual property into our up market manufacturing. I visited universities in the course of making made in Britain. I was particularly impressed by our business model in selling medical education to foreigners. The Germans make cars, we make foreign doctors and that's something we can be seriously very proud of. We charge £22,000 a year in the latter two years of their training and we get them to work in the NHS and we tell them it's part of their education. If there's any greater symbol of the journey which our economy has taken away from old industries, it is John in the saga over the name CBI. Now you see it used to be in those old conferences the confederation of British industry. There was a point though, you evidently decided that if we weren't going to have industry, we'd better stop the eye standing for industry. I don't know what it stands for now, but I think it's in it. It's the confederation of British in it. Are we the only, are we the only, you are the voice of business, are we the only country not to have a body that has the word industry in the title. Now it's tempting to think that there's journey up market in which we shunned so many great industries in which Britain had been an early pioneer. It's tempting to think this was all a complete and stupid disaster. But before we go down that route, let's just give you some facts. From 1997 to 2010, which really was a period of the Labour government for one thing, but was the period in which China totally emerged as a dominant manufacturing nation. From 1997 to 2010, and that includes the last few awful years, GDP per capita in the UK grew faster than in any of the other old established industrial countries, the G7, the big ones. Our hourly output, the hourly output of the average worker, Labour productivity in the market sector, not in the public sector, in the market sector, that grew pretty well as fast as the United States and it grew faster than in the Eurozone. And as a manufacturing nation, we managed to continue making less, but selling it at more valuable prices, selling it for more. And interestingly, and people really find it hard to believe this, the peak in the value of our manufacturing output was reached in this first quarter of 2008. I mean, it's been downhill since then, right? Let's not be any doubt. But the first quarter of 2008 was the highest value point in manufacturing output. And that is, if you like, a sense of why, as a nation, we didn't completely lose the plot. We did something that made a certain amount of sense. We responded to the shifting tectonic plates in the world and we moved up market into industries that China couldn't compete in. It was never going to have globally competing universities as quickly to match ours. It wasn't going to have a pharmaceutical industry or a Rolls Royce to match ours. It was doing the stuff it could do and we moved on to do the stuff that we could. And that, ladies and gentlemen, is the end of the good news. Because now we have to reflect on the bad news. And while everything I've said is true, one overriding fact remains. Our grand experiment in moving up market didn't quite work. Firstly, it didn't work because one of the star industries responsible for earning so much turned out to have much less in it than meets the eye. Financial services earned a lot. It remains a national strength, but it's a subsidy junkie on a scale that British Leyland could only have dreamed of. The scale of UK's taxpayer support, direct, indirect, hidden and explicit is enormous. The largesse of the American taxpayer in supporting AIG for mistakes made here in London, support from the American taxpayer running to the tunes of hundreds of billions of dollars, which was not designed to save AIG but to protect global banks from the consequences of their failed business models. Even the recent French and Belgian support for DEXIA has indirectly helped investment banks that would otherwise struggle to survive. Annoying as that is, that is not the real failure of the UK experiment in moving up market. The more important piece of bad news in what's happened over the last decade is that we never quite managed to get our exports to a level where they sustained the lifestyle to which we were accustomed. We couldn't pay all our bills this way. We could pay most of them, but not all of them. And our international position deteriorated. Now there is an old law in economics and it's actually one that's profound and worth remembering. And it's one that has not been challenged by recent events. The law runs, if something is unsustainable, it will not be sustained. And it's amazingly profound and it's worth looking at all sorts of things and just asking yourself how and why and what will happen when it is not sustained. And our trade position is not sustainable. One theory of what's gone wrong is the theory, which I think is if you like common now, which is we lost our collective senses, we went mad, we lost the plot, we failed to understand that old industries are the good industries and we became besotted by banks and other things. That actually isn't my theory. I think what happened was this. We were misled by the exchange rate. It led us astray. We had a false price signal of a very significant kind for a very prolonged period. And the best way of thinking about the exchange rate is a kind of, it is the price that dictates how much of our economy is going to be in the tradable sector exporting and how much of our economy is going to be in the non-tradable sector facing domestic consumers and serving domestic consumers. A strong exchange rate encourages the growth of a domestic non-tradable sector. A competitive exchange rate encourages the growth of a tradable sector. And what happened over the last decade, and it's not very complicated, is that our exchange rate was strong, too strong and unsustainably strong. And it was strong because foreigners bought pounds to lend to us and we were happy to borrow them. And as a result of that money coming in, the pound was too high and we let our tradable sector get too small. We might have been a little mad in doing all that borrowing. Maybe we were very mad in doing that. But you can see why we got the structure of economy that we did. It wasn't because we were unproductive or because we're useless or because we can't run things or because we're inferior to the Germans in some genetic way that they can do stuff that we can't. It wasn't any of that. We had a price signal that led to shrinkage in the tradable sector and meanwhile we were with gusto being very productive in the industries that we had moved into. The basic fact is we just got too upmarket for our own good. And that has left us with a challenge now to rebuild our tradable sector. And unfortunately that's just at a time when the world is very much not in the mood for trading. We need more exports. We probably need more manufacturing because that has a bigger role to play, a much bigger role to play in exports than it does in the economy as a whole. And overall it adds up to a change of direction. And I have to congratulate the CBI with partners Ernst and Young who've set out some ideas on where Britain is strong and what more we can do. No one can say we didn't make a good stab at trying to do it the way we've been doing it for the last few years with the world's second biggest exporter of commercial services after the United States in per capita terms much bigger than them. And the truth is we didn't quite make it. And this, ladies and gentlemen, is why the CBI's conference today has been so on the ball. If we have the wrong kind of economy, what needs to change is the size of our export sector. And that is a supply side adjustment. It's a really difficult thing to change. Now why I like your conference theme is because at the moment we on the today program in politics, in economic policy, generally the debate is over something different. It's over demand and spending. It's between austerity versus growth. More spending versus less spending. And that is an important debate and not one I intend to join. I work for the BBC, I have no opinions on anything. But that wasn't meant to get a laugh. But what you've got to understand about that debate is it's a debate over short term, second best options. Spending more on domestic facing services will certainly help in the short term. But it'll saddle us with more debt in the long term. And I don't see it as a no brainer which sides you to be on in that debate. I don't even see it as a dynamic. It's a catch 22. We need recovery to get the debt down. And we need to get the debt down in order to have a sustained recovery. It's an extremely difficult choice. What we actually need, fairly obviously, is more spending from people who are not indebted like ourselves, but from other people, i.e. foreign markets, the very markets that your conference today has been talking about. So to me there's an argument to be had about austerity versus growth, but not to the total distraction of the far more important argument about how we make this supply shift in our economy in which we take, I don't know, maybe 5% of our national income out of the non-tradable sector and put it into the tradable sector. One reason why I suspect we talk so much about spending is that we know what to do about it. You know, there's an argument about quantities of easing, easing up government borrowing more, spending plans, printing money. It's all very straightforward. Rebalancing an economy is not. And I'm not going to pretend I have any particularly useful ideas. If I was a politician, I'd say if the economy is doing a three-point turn, I'm going to come up with a three-point plan. Or like the dishwasher tablets that started as double action and then went to triple and quintuple action, maybe a four-point or five-point plan. And I wrote that and then noticed that the CBI in fact has a five-point plan. And as if to emphasise how hard it is to come up with policies that affect the supply side, I noticed that point one of your five-point plan is that there should be a national export strategy, which seems to me another way of saying there should be a plan. Point two of your five is that there should be the right policy framework. And I'm thinking policy framework, by that do we mean a kind of a plan? Is that the sort of thing we're talking about there? But I'm genuinely not trying to mock, although it sounds like it. I'm genuinely trying to congratulate you, congratulate you CBI, Ernst and Young, because I'll tell you what, I don't think it is easy. And I think ultimately altering the supply side of the economy is where it's all at. That's where the first best options are, rather than the second best options of demand side policies. And at the moment it seems to me it's all hands on deck, basically. All good ideas, welcome. All previous thinking can be thrown out the water. We've all got to rethink everything we previously believed. And let's not be too mocking of people who've made a go. Deep down though and in conclusion I would say what we really know is that the rebalancing is not going to be government inspired. It's not going to be CBI inspired, even if you thought to put the word industry back in your title. Deep down I think we ultimately know it's actually going to be business policy that does it. Companies finding a little bit of that in a German. Faced with consumers spending less at home as German companies have been for basically the entire period since the Second World War. Faced with an austerity at home, it's companies thinking, my goodness, why don't we try and sell a bit more abroad. And I offer that comparison to Germany, not because Germany has found all the answers, Germany's only about as rich as we are. I mean it's not no great reason for shame there. But we do, at this point, need to tilt very much in their direction. It is not going to be easy. It's like the relationship between alcohol and sex. What recession does is make the need all the much greater, but the tools far less effective. My point about going through the good news rather than as well as the bad news, the successes of the British business model as well as the failures, my desire to give a balanced perspective on that is that as soon as you understand that we're not an unproductive and useless nation, we can actually afford to have a little bit of ambition. We can afford to think of ourselves as being up there in the Premier League rather than fatalistically accepting that somehow we failed. We can do all of that because actually we have had successes although we've clearly pointed our economy in the wrong direction. The mood of the moment might be that we can't do anything and only the Germans have found the path of salvation, but our story of the last decade tells us that while there's a lot to do, we can at least have some optimism about our ability to do it. I'm not trying to sort of hark back with sort of violins playing to a great imperial and industrial past, although it is worth noting that in the 1850s Britain literally accounted for 50% of world trade. I'm not harking back to that. We don't need to get back to that level, ladies and gentlemen. You don't have to be that ambitious. We actually just need to get up from about four to maybe five or six. I've written to Sir John, you're not Sir John, it's Sir Roger and John. John, you're spot on I think in having recognised the importance of this issue, of rebalancing our economy. I think for those of you sitting here though, it's time for you to stop thinking what is the CBI going to do? How many points is the plan going to have? What is the government going to do? There really is nobody that is going to do it apart from businesses represented in this room. I would say that it actually isn't going to be an export-led recovery. It's going to be export-led or we aren't going to really have a recovery. Thank you very much indeed.