Alex Brummer: Britain Must Embrace AI, Not Drift Back Toward an Inflexible Europe

Andy Burnham appears certain that Brexit and Liz Truss dealt the decisive blows to Britain’s growth prospects. Yet he now faces a problem of his own: a punishing borrowing cost — his very own “moron premium” — that Britain can ill afford.

The fixation shared by Burnham, and earlier by Keir Starmer and Rachel Reeves, with drawing closer to the EU in the belief that it will meaningfully ease the squeeze on living standards is misplaced.

That is not to say Britain has nothing to gain. Being shut out of Europe’s €150billion defence fund is hard to justify. The UK remains a central Nato member and is home to some of Europe’s strongest avionics and defence technology.

Companies such as Cambridge Aerospace, with its pioneering low-cost, AI-powered interceptor technology for drones and ballistic missiles, point to the future of the industry just as much as the established giants do.

But warm smiles at the Bayeux Tapestry unveiling at the British Museum should not be mistaken for a breakthrough. On difficult questions such as “Made in Europe”, French President Emmanuel Macron is unlikely to offer Britain much room for manoeuvre.

Improved economic ties with Brussels would certainly be welcome, and strained industries including farming and steel could see real benefits.

Even so, the gloomy assumptions from the Office for Budget Responsibility, the Treasury and others that Brexit would drag the UK under remain far from proven.

Far more responsible for stuck growth have been the once-in-a-lifetime pandemic, geopolitical strife from the Russian war on Ukraine and endless Middle East turmoil in the three years since the Hamas October 7 attacks on Israel.

Those who seek a return to the EU think it will create some kind of utopia.

Border controls might speed up, but don’t count on it. Yes, the UK’s goods deficit with the EU has expanded, and that has been hugely difficult for small and medium-sized enterprises.

However, regaining access is not going to change the broader macroeconomic picture. Data shows Britain’s GDP per capita growth has been in line with France and ahead of Germany since Brexit.

Berlin has experienced an economic nightmare. There is some relief that the country’s RWI economic institution raised its growth forecast to a magnificent 1.3 per cent this year and 1.1 per cent in 2027.

Britain’s competitive advantage is in its lighter, services-based economy. It is roaring away, with exports up 21 per cent since the pandemic.

Even that cannot be taken for granted, as was noted at an Institute for Economic Affairs seminar on stagnation this week.

The knowledge economy, symbolised by our pharma industry, firms such as Relx and the London Stock Exchange Group, is most susceptible to AI disruption.

The idea of data centres and Anthropic robots being in charge of future prosperity is disturbing.

Nevertheless, AI must be embraced if the UK is to stay ahead of a sclerotic European pack.

Home sick

Labour is right to identify planning reforms and housing as growth drivers.

The UK needs to play catch-up in comparison with G7 rivals. Angela Rayner, as housing minister, has not been scared to take the big, controversial decisions.

She has approved a data centre adjacent to Brick Lane in east London and an M&S at the Marble Arch end of Oxford Street.

There is a big difference between willing housing to be built, assigning money for affordable homes and getting it done.

Commercial developers fight hard to reduce exposure to affordable housing.

Housing associations and councils lack the capacity and willpower to go big.

Homebuilder Crest Nicholson is scaling back its targets from up to 1,500 homes in the next financial year to a 1,350- to 1,400-unit range.

High energy, employment, masonry and other costs stymie the sector.

Nothing hurts more than surging mortgage and debt interest bills. Fixing the bond mayhem is fundamental.

Keep stakes

Jolly good to see Business Secretary Jonathan Reynolds reportedly nixing an exit tax for companies leaving the UK.

However, I thought Chancellor John Healey was writing the Budget.

What’s necessary are generous tax and other incentives to keep innovators. And use of the National Security & Investment Act to ward off overseas marauders.