The United Kingdom Is Late to Economic Security Planning—but Not Too Late

This week, UK Prime Minister Keir Starmer told the country that this October's budget would be “painful.” Grappling with the country's books, the new government needs to reconcile short-term cuts with the long-term investment that drives future productivity and supports national income. That task is now more complex due to recent global events, which mean security must feature more heavily in decisions previously seen as purely economic. The problem is that right now, there is no clear strategy for making that happen.

Decisions around economic investment have long involved security considerations, and vice versa. The question is one of degree. Several decades of peace and prosperity saw usually short-term economics dominating decisionmaking. The result was hyper-efficiency and low cost, at the expense of managing vulnerabilities in industries and infrastructure.

COVID-19, Russia's invasion of Ukraine and the implications for energy supplies, economic coercion by China and dependencies on Chinese products, and growing techno-industrial competition between China and the United States have all shone a very bright spotlight on the folly of such complacency and the lack of resilience it creates.

In the United Kingdom, efforts towards economic security have been introduced in a fast-paced, but scattered and disorderly, flourish. Under the previous government, important, if muddled, developments were added to the United Kingdom's economic security toolbox: investment screening, export controls, and supply chain resilience, to mention a few. The Integrated Review Refresh in 2023, which aimed at comprehensively assessing the government's security, defence, development, and foreign policy priorities, fell short of giving economic security initiatives the much-needed cohesion that only a dedicated strategy can provide.

The new UK government holds a unique opportunity to change course by adopting an economic security strategy. Chancellor Rachel Reeves' economic approach, Securonomics, places security and growth at the core of Labour's vision of economic development, but how might that be achieved? An economic security strategy would clarify how different initiatives and policies could bring more resilience and prosperity.

A concept proposed in Japan should guide this strategy. 'Strategic indispensability' means possessing and developing technologies or capabilities that nobody else has. Such an approach fulfils four important objectives. First, it forces a country to examine its capabilities and decide which are its priority areas. Second, it creates a rationale for targeted investments in those areas and limits wasteful investments. Third, it protects against coercive behaviours such as the restriction imposed by China to Australian and Lithuanian imports, to mention a few. Fourth, and perhaps most importantly, it incentivises different global actors to invest in different areas, safeguarding an interdependent world economy.

The path ahead for a UK strategy has been broadly set out in evidence provided in January by the Cabinet Office and other ministries and departments to a parliamentary hearing on economic security. The fact that this was presented in writing, with no separate publication or promotion by government, illustrates a 'below the radar' approach to economic security which should be avoided in the face of current challenges.

A future strategy should safeguard national security from the threats that economic interactions may carry; boost the economic strength and increase resilience; collaborate with partners to increase safety and boost resilience; and do so more efficiently.

One example would be the growing collaborations on critical materials. To the United Kingdom, mineral security is vital because it stands at the basis of manufacturing. From chips to batteries, critical minerals are necessary. Although the United Kingdom has made some agreements in this area, including the Mineral Security Partnership and bilateral agreements with Australia, Canada, and Japan, the United Kingdom needs to up its game on collaboration. It has not, for instance, negotiated agreements with the neighbouring EU, and not only on critical minerals.

Green technologies, AI, nuclear fusion, quantum computing, and small modular nuclear reactors are areas where the United Kingdom could benefit greatly from working better with others. All areas of technological advancement that will be key for the United Kingdom's prosperity, but where the United Kingdom does not need to go alone to bring growth to the country.

Coordination and cohesion between different actions towards economic security is vital. Investment screening, for example, could do much more for UK prosperity and strengthen collective resilience if it comes with a system, such as a digital portal, where the United Kingdom can seek alternative investors among partners for transactions in strategic assets that have been vetted or blocked.

The United Kingdom has taken some steps to protect its economy from threats. It now needs to ensure that those steps are purposeful and in the same direction. Done right, a robust economic security strategy for the United Kingdom would bring industrial and trade strategies together with safeguards, incentives, and collaboration based on strategic indispensability. If they can land that, the government might not only safeguard the United Kingdom's interests but also propel it towards a better future with a stable and growing economy.