0:00:04 > 0:00:09Here's a lesson in the economics of the last two-and-a-half centuries.
0:00:19 > 0:00:22It's one long chase.
0:00:22 > 0:00:28Someone invents a clever way of making money.
0:00:28 > 0:00:29Others try to catch up.
0:00:29 > 0:00:34We were the first to industrialise, but they caught us,
0:00:34 > 0:00:38so we moved on by using our brains rather than our hands.
0:00:43 > 0:00:46Always trying to outwit our competitors.
0:00:47 > 0:00:51It's all about being more inventive.
0:01:02 > 0:01:09That has kept us ahead so far, but others are still out to steal, copy or improve on what we do.
0:01:22 > 0:01:27In this programme, we look at where this chase has taken us.
0:01:30 > 0:01:36Not to disaster, but to new industries based on brainpower,
0:01:36 > 0:01:39like pharmaceuticals or technology.
0:01:40 > 0:01:43Or our film and other creative industries.
0:01:43 > 0:01:49Creativity and innovation are the lifeblood of the British economy.
0:02:07 > 0:02:13'I'm in China, on my way to the enormous international fair in Shanghai,
0:02:13 > 0:02:19'the Expo. I want to find out how Britain sells itself internationally.
0:02:19 > 0:02:25'It's vital we sell more to the world to pay the bills that have arrived since the financial crash,
0:02:25 > 0:02:29'but have we got anything the world wants to buy?
0:02:29 > 0:02:34'In this series, we look at the manufactured goods we sell,
0:02:34 > 0:02:36'at the services we export
0:02:36 > 0:02:42'and today at the most nebulous sector of all - intellectual property.
0:02:47 > 0:02:53'The Expo is a great place to show off our wares to 400,000 visitors a day.
0:02:57 > 0:03:03'Every nation is represented here. Their pavilions are their shop windows.'
0:03:09 > 0:03:11Luxembourg.
0:03:12 > 0:03:15'Some are more successful than others.
0:03:15 > 0:03:22'160 years ago, we started these world fairs with our own Great Exhibition.
0:03:22 > 0:03:26'Back then, we were secure in our role as workshop of the world,
0:03:26 > 0:03:31'but the world has been catching up ever since.'
0:03:31 > 0:03:37Now we're reduced to just one pavilion between the French over there, the Italians over here.
0:03:37 > 0:03:41And we're competing for attention with 186 others.
0:03:43 > 0:03:48'But I have to say our pavilion stands out in this crowd.'
0:03:48 > 0:03:53Amid the bland stands and the ones that try too hard,
0:03:53 > 0:03:57ours is a shimmering beacon of originality.
0:03:57 > 0:04:02So striking and yet, really, quite subtle.
0:04:06 > 0:04:11'But other countries sell themselves in a different way - with products.
0:04:12 > 0:04:15'The French pavilion has wines on display.
0:04:17 > 0:04:21'The Italians, fashion and Ferraris.'
0:04:24 > 0:04:29Ours is less hard sell. It's more high concept.
0:04:29 > 0:04:36It's a wonderful idea - quarter of a million seeds embedded in these acrylic needles.
0:04:40 > 0:04:43But, you know, the only thing is
0:04:43 > 0:04:45there really is nothing in here.
0:04:50 > 0:04:54'For many, our empty pavilion symbolises our economy.
0:04:54 > 0:04:57'"It's a big void," they say.
0:04:57 > 0:05:01'"We don't make anything any more, so we have little to sell."
0:05:01 > 0:05:06'Many feel we're economically inadequate.'
0:05:07 > 0:05:13Looking down on this thing from up here, you get that sense of a link between economic activity
0:05:13 > 0:05:15and national identity.
0:05:15 > 0:05:21What do we do? What do we specialise in in the world economy? What's our niche?
0:05:21 > 0:05:24What are we proud to produce?
0:05:24 > 0:05:29'Well, to me, our pavilion perfectly symbolises the best of our economy -
0:05:29 > 0:05:33'our inventiveness, our brilliant ideas.
0:05:34 > 0:05:40'The question is, can we sell enough of them to get us out of our economic gloom?
0:05:48 > 0:05:50'As the original industrial nation,
0:05:50 > 0:05:55'Britain long ago discovered that being clever is highly lucrative.
0:05:55 > 0:06:00'There's a rule in the modern economy - you make the most money by being first,
0:06:00 > 0:06:05'by doing what others can't do. We've made ourselves rich that way.
0:06:05 > 0:06:11'A good example - the British company that transformed the world's skylines and made billions
0:06:11 > 0:06:14'in the process.'
0:06:16 > 0:06:22It's about 200 metres, 240 metres or so to the top of the building.
0:06:25 > 0:06:27Wonderful view. Wonderful view.
0:06:28 > 0:06:36'The company that made the windows for this skyscraper tells you why innovation is such a big earner.
0:06:36 > 0:06:42'One discovery goes a very long way. It can be replicated again and again.'
0:06:43 > 0:06:48Now this building has 3,960 panes of glass
0:06:48 > 0:06:53and they weigh 350,000 kilograms.
0:06:53 > 0:06:57'The glass was made by the St Helens firm Pilkington's.'
0:06:57 > 0:07:01Not only was this glass made in this country,
0:07:01 > 0:07:07but the process, a wonderfully innovative process which allowed this glass to be made,
0:07:07 > 0:07:09was developed in this country, too.
0:07:10 > 0:07:16'It changed everything. Virtually all skyscrapers are made using it.
0:07:16 > 0:07:21'It's called the float glass process and Pilkington's invented it in 1952.
0:07:21 > 0:07:27'It was theirs and theirs alone and it took them from just being one of the pack
0:07:27 > 0:07:29'to being well out in front.'
0:07:38 > 0:07:44St Helens is the greatest centre of glassmaking in the world.
0:07:44 > 0:07:48So let's begin with this kind of glass
0:07:48 > 0:07:55and tell the romantic story of one of the greatest industrial inventions of the age,
0:07:55 > 0:07:57the float glass process.
0:08:03 > 0:08:09'Before float, glass panes were made by pouring molten glass onto a plate.
0:08:09 > 0:08:14'But there was a problem. The glass produced was rough and uneven.
0:08:14 > 0:08:18'It had to be ground and polished by giant industrial machines.
0:08:18 > 0:08:22'And this process was hugely expensive.
0:08:23 > 0:08:30'After the Second World War, the demand for housing and cars created a massive need for glass.
0:08:30 > 0:08:37'It was a race for manufacturers worldwide to develop a cheaper production process.
0:08:38 > 0:08:44'In 1947, Pilkington's found the first essential ingredient in the creation of a great innovation -
0:08:44 > 0:08:48'a genius. Engineer Alastair Pilkington.
0:08:48 > 0:08:53'Oddly, he wasn't a close relative, but had the same surname.
0:08:54 > 0:08:59'He experimented with the idea of producing perfectly flat clear glass
0:08:59 > 0:09:02'by floating it on molten tin.
0:09:02 > 0:09:08'No one had made it work before. Early results suggested the method had promise,
0:09:08 > 0:09:14'but converting this into an effective industrial process was an immense challenge.
0:09:17 > 0:09:23'You can see the scale of his ambition by walking down the float line today.'
0:09:23 > 0:09:28This bit is the... The Pilkington bit, the clever bit.
0:09:28 > 0:09:34That's the float glass. If you want to have a look through, you'll see the ribbon coming through.
0:09:34 > 0:09:40- Oh, yes. Absolutely clear. So the stuff rippling on the top is glass?- It's glass, yeah.
0:09:40 > 0:09:45'Then came the second ingredient for innovation - money.
0:09:45 > 0:09:53'In 1955, after only three years' development, Pilkington's invested in a full-scale production line.
0:09:55 > 0:10:01'It was a massive financial risk, soaking up all the company's profits, month after month.'
0:10:03 > 0:10:08You need to stand back. That flame's going to come out.
0:10:08 > 0:10:13- There you go.- Right. Is there a good end to put first? - Just stand to one side...
0:10:13 > 0:10:17'A year after they started their test line running,
0:10:17 > 0:10:24'they still weren't producing saleable glass from molten tin, and it was costing a fortune.'
0:10:24 > 0:10:31- OK. There you go, it's gone. - 'It was the third ingredient that created perfect glass.'
0:10:32 > 0:10:34- Wonderful.- 'Luck.'
0:10:34 > 0:10:40A certain critical part of the plant broke and this changed its shape
0:10:40 > 0:10:44and by this means we suddenly, to our surprise,
0:10:44 > 0:10:48found ourselves making our first saleable glass.
0:10:56 > 0:11:01The whole section of the line of grinding and polishing could go.
0:11:01 > 0:11:07You can see the glass here just comes out absolutely flat and smooth.
0:11:10 > 0:11:13'After seven years' toil
0:11:13 > 0:11:17'and £7 million - equivalent to £130 million today -
0:11:17 > 0:11:24'Alastair Pilkington achieved his goal, beating all competitors to making better, cheaper glass.'
0:11:24 > 0:11:31So did that initial £7 million investment, which seemed like a lot of money in 1950s prices,
0:11:31 > 0:11:35did it pay off? Well, of course it did!
0:11:35 > 0:11:40Because this was a) so valuable and b) no one else could do it,
0:11:40 > 0:11:46Pilkington didn't just have an innovation that created float glass.
0:11:46 > 0:11:50They had an innovation that generated enormous returns.
0:11:50 > 0:11:53Innovation pays.
0:11:54 > 0:12:02'For its innovation, Pilkington made billions as other companies paid to use the technology.
0:12:02 > 0:12:06'Today the company's part of a Japanese-owned glass giant,
0:12:06 > 0:12:13'but it continues to make glass here, to do research here, and it generates plenty of earnings.'
0:12:13 > 0:12:17- And you can jump on it? - Yeah. No problem.
0:12:17 > 0:12:19Oh, yeah.
0:12:23 > 0:12:25Seems to be safe.
0:12:25 > 0:12:31'The huge rewards it earned through the decades derived from coming first.
0:12:33 > 0:12:37'We'd all like that kind of success, so where should we look for it?
0:12:37 > 0:12:42'Well, to understand this, think of the entire production process
0:12:42 > 0:12:46'and the different stages in it. Call it the value chain.'
0:12:48 > 0:12:55When it comes to earning a good living for ourselves, we have to produce things people will pay for.
0:12:55 > 0:12:59A lot of us assume that means manufacturing, but that's naive.
0:12:59 > 0:13:04There are three major steps of value creation in the production process.
0:13:04 > 0:13:08And the first is about the magic of creativity.
0:13:11 > 0:13:16Yes, the first is coming up with a new product or process, like Pilkington,
0:13:16 > 0:13:20built on the research of scientists and engineers.
0:13:24 > 0:13:28Only then comes part two - the manufacturing,
0:13:28 > 0:13:34the machine in the middle that churns out the product. This is the tangible bit of the process.
0:13:34 > 0:13:40Now this does add value, of course, but less than you'd think, as so many nations can do this well.
0:13:40 > 0:13:43Then there's the third step,
0:13:43 > 0:13:47the marketing, advertising and branding. Teams of people
0:13:47 > 0:13:52with innovative ideas to make products appealing.
0:13:54 > 0:14:01Now in the modern value chain it makes sense for us to innovate in the first stage,
0:14:01 > 0:14:05coming up with the idea, and the third, selling it.
0:14:05 > 0:14:09That's where the biggest bucks can be made.
0:14:10 > 0:14:17I know it's not a very British example, but one study broke down the cost of a 300 iPod.
0:14:17 > 0:14:24Now most of the price goes to the retailer and to the people who supply all the components,
0:14:24 > 0:14:29but on the back it says, "Designed by Apple. Assembled in China."
0:14:29 > 0:14:35For the design, Apple get about 80. For the assembly, China gets less than 5.
0:14:35 > 0:14:40That is the value of creativity and branding.
0:14:44 > 0:14:48'I've said the global economy is like a chase.
0:14:48 > 0:14:52'The more advanced economies, like ours, run ahead
0:14:52 > 0:14:58'with the skills to get to where the most money is and where the others find it hard to follow -
0:14:58 > 0:15:01'to the end of the value chain.'
0:15:01 > 0:15:05Of course, we do have a lot of problems at the moment,
0:15:05 > 0:15:11but the economy was right to concentrate on the most valuable parts of the value chain.
0:15:11 > 0:15:15More science at one end, more marketing at the other.
0:15:15 > 0:15:19The science is built on research and development, or R&D.
0:15:19 > 0:15:26Many companies have made the journey away from simple manufacturing towards more research-based output.
0:15:30 > 0:15:36'The history of Britain's biggest spender on R&D, GlaxoSmithKline,
0:15:36 > 0:15:39'illustrates the transformation.
0:15:39 > 0:15:46'In the 1930s, Glaxo made dried baby milk under the slogan, "Glaxo builds bonny babies".
0:15:46 > 0:15:48'But then came the Second World War.
0:15:56 > 0:16:02'The discovery of penicillin offered a potential lifeline to wounded soldiers,
0:16:02 > 0:16:07'but the problem was scientists only knew how to make it in tiny quantities.
0:16:07 > 0:16:11'Drug companies, including Glaxo, were asked to find a way
0:16:11 > 0:16:14'to manufacture penicillin in bulk.
0:16:16 > 0:16:23'Its scientists worked day and night on the task. It was only towards the end of the war
0:16:23 > 0:16:26'they accumulated a significant stockpile.'
0:16:33 > 0:16:36On D-Day, the 6th of June, 1944,
0:16:36 > 0:16:39156,000 people landed
0:16:39 > 0:16:43on these very beaches of Normandy.
0:16:46 > 0:16:50'On that day itself, 6,000 were killed,
0:16:50 > 0:16:52'but 18,000 were wounded.
0:16:55 > 0:17:01'Penicillin made an enormous difference. Instead of saving five out of every ten wounded,
0:17:01 > 0:17:05'medics were saving eight out of ten.
0:17:07 > 0:17:11'Bolstered by refocusing its efforts on R&D,
0:17:11 > 0:17:15'Glaxo emerged from the war a very different company.
0:17:15 > 0:17:21'It had made a fundamental shift from the relatively easy task of manufacturing powdered milk
0:17:21 > 0:17:26'to the tougher job of developing drugs.
0:17:27 > 0:17:33'And when the NHS was founded in 1948, Glaxo was ideally placed to be a preferred supplier.
0:17:33 > 0:17:35'It never looked back.'
0:17:37 > 0:17:42The development of Glaxo mirrors that of our economy overall
0:17:42 > 0:17:48from manufacturing things to manufacturing innovations and ideas.
0:17:48 > 0:17:52It illustrates how we've moved up the value chain.
0:17:52 > 0:17:55'This is a perfectly natural evolution.
0:17:55 > 0:18:01'As economies become more advanced, they have the resources to spend on research and education.
0:18:01 > 0:18:07'As they spend more on education and research, they become more advanced.
0:18:07 > 0:18:09'That's what progress consists of.
0:18:12 > 0:18:19'And progress is exactly what we've enjoyed in Britain and we need more of it if we're to pay our way.
0:18:19 > 0:18:23'Our economy has moved into science-based industries.
0:18:23 > 0:18:30'Pharmaceuticals is one of our most important. Its exports are worth £18 billion.
0:18:30 > 0:18:35'Glaxo, now called GSK, is the world's fourth-largest pharmaceutical company.
0:18:35 > 0:18:40'None of that would be possible without R&D.
0:18:40 > 0:18:43'I want to see what that looks like.
0:18:43 > 0:18:49'This operation in Hertfordshire is where many of GSK's innovations originate.'
0:18:50 > 0:18:57This is really a double facility - a factory and an R&D centre - with 1,000 people in each.
0:19:00 > 0:19:05'It isn't easy to invent or discover things,
0:19:05 > 0:19:09'otherwise everyone would do it. And it's a risk.
0:19:09 > 0:19:12'Andrew Witty is the Chief Executive of GSK.'
0:19:12 > 0:19:17- So we have to dress up?- We do. There's a very strict protocol.
0:19:17 > 0:19:21These are disposable lab coats, are they?
0:19:21 > 0:19:25- They'll be recyclable. - Here we go.
0:19:25 > 0:19:30- We need a pair of goggles.- Get the goggles on.- And we're good. OK.
0:19:32 > 0:19:35So the cost of a new drug.
0:19:35 > 0:19:41- What does a drug cost, then? - If you look for the industry and take the total amount spent on R&D
0:19:41 > 0:19:45divided by the number of successful drugs actually introduced,
0:19:45 > 0:19:48it runs at about £550 million each.
0:19:48 > 0:19:55- £550 million. It takes into account the cost of all the failures. - It's the only practical way.
0:19:55 > 0:20:00For GSK and our competitors, we're all trying to beat that average.
0:20:02 > 0:20:06'How do you improve the odds? GSK has discovered
0:20:06 > 0:20:10'it works to get the right cluster of talent together in one place.'
0:20:11 > 0:20:16As science has evolved, it's much more multi-disciplinary.
0:20:16 > 0:20:22The discoveries all occur on the interface of disciplines. Quite often you'll find an IT expert,
0:20:22 > 0:20:27an informatics expert or a molecular designer who uses computers
0:20:27 > 0:20:31with somebody who does everything in a test tube. It makes things happen.
0:20:31 > 0:20:35'Even with such a cluster of brains, it's not easy.
0:20:35 > 0:20:39'It's back to that constant chase. You research to stay a step ahead
0:20:39 > 0:20:43'and then you watch others catch up.'
0:20:43 > 0:20:48If you succeed, you can make a very good return with a patent life.
0:20:48 > 0:20:54When your patent goes, you will essentially make no money from that business going forwards.
0:20:54 > 0:21:00That is what drives this industry. Many companies have not been able to reinvent themselves in that 10 years
0:21:00 > 0:21:02when you earn the reward.
0:21:05 > 0:21:09One of the worst things about my job, a slightly adrenaline-driven moment,
0:21:09 > 0:21:14is you get data at the end of a 15-year research programme
0:21:14 > 0:21:20and there's a moment when somebody opens the envelope and it either says success or failure.
0:21:20 > 0:21:25And the reality is that's what makes this such a high-risk and expensive business.
0:21:26 > 0:21:32'There's a vast amount of money coming into the UK economy from companies like GSK
0:21:32 > 0:21:36'who specialise in research and innovation.
0:21:36 > 0:21:40'But like Pilkington's, GSK innovates
0:21:40 > 0:21:42'and also manufactures.
0:21:43 > 0:21:49'This room churns out billions of doses of respiratory treatment each year.'
0:21:55 > 0:21:57Essentially, this is the line.
0:21:59 > 0:22:06This room here produces 50 million packs of Seretide Advair a year for distribution around the world.
0:22:06 > 0:22:11Overall, the company last year sold £5 billion of Seretide Advair.
0:22:19 > 0:22:25'The manufacturing is clever, but the real value has been added by the investment in knowledge.
0:22:25 > 0:22:32'And that knowledge is not just to do with the ingredients of a drug, but also ways of making it.'
0:22:36 > 0:22:4120 years ago, this machine would have consumed the entire building space.
0:22:41 > 0:22:48It would have had 20 or 30 people working on it and you've never have the volume capacity you have today.
0:22:48 > 0:22:53You can see here - one person keeping an eye on this facility.
0:22:53 > 0:22:5960,000-70,000 packs already coming off it. We'll get it up to a peak of about 108,000
0:22:59 > 0:23:01when it's running full blast.
0:23:06 > 0:23:11'Advair Seretide is exported around the world
0:23:11 > 0:23:16'and even though GSK also has manufacturing plants outside the UK,
0:23:16 > 0:23:20'we still earn money from them because the drug was invented here.'
0:23:20 > 0:23:27The lesson from GSK and Pilkington is that although they both manufacture, it's the brainwork
0:23:27 > 0:23:30and innovation that adds most value to what they do.
0:23:30 > 0:23:36What's the logical conclusion of that? Companies that don't actually make anything physical at all.
0:23:36 > 0:23:40Nothing? How far can we push that business model?
0:23:40 > 0:23:47Can we really pay our way in the world by becoming a nation of boffins and geeks?
0:23:52 > 0:23:58'Well, come to Cambridge, to the area outside the city known as Silicon Fen.
0:24:00 > 0:24:05'1,400 hi-tech companies have sprung up in these business parks
0:24:05 > 0:24:07'employing over 40,000 people.
0:24:10 > 0:24:17'It's an interesting feature that these businesses like to be near each other, to be plugged in.
0:24:17 > 0:24:21'They tend to cluster, just like the scientists in Glaxo labs.
0:24:21 > 0:24:26'One of the companies here has become the runaway success of the last decade
0:24:26 > 0:24:33'and what they do can be found inside virtually all the digital devices we take for granted.'
0:24:38 > 0:24:40In here, mobile phone.
0:24:41 > 0:24:43And there...
0:24:46 > 0:24:48Somewhere here
0:24:49 > 0:24:52is a little piece of Britain.
0:24:53 > 0:24:59There we go. There it is. Just under NEC. You can see it says ARM.
0:24:59 > 0:25:04It's a very successful company, one of our best, actually,
0:25:04 > 0:25:08and remarkably few people have actually heard of it.
0:25:13 > 0:25:16'Unlike Pilkington or GSK,
0:25:16 > 0:25:20'ARM Holdings focuses entirely on stage one of the value chain.
0:25:20 > 0:25:25'They don't make processors. They design them.
0:25:25 > 0:25:30'It's pure innovation and it's valued at over £7 billion.
0:25:30 > 0:25:32'Tudor Brown is its President.'
0:25:34 > 0:25:37- Hi!- Tudor! Hello, Evan Davis.
0:25:37 > 0:25:43- Good to meet you. I've heard a lot about you. - Ha! I've heard a lot about you.
0:25:43 > 0:25:47So come on through. Let me show you some other technology here.
0:25:49 > 0:25:55You wouldn't sort of know that this is one of Britain's most successful companies.
0:25:55 > 0:25:59- I don't know. How do you...? - It looks quite plain.
0:25:59 > 0:26:02Well, there's no great buzzing machines.
0:26:02 > 0:26:08- This is thinking and whatever. - I like the artwork. - Those are just a couple of plots.
0:26:08 > 0:26:14- Let's take you into an office. - It's quite warm in here. - Some of them like it warm.
0:26:14 > 0:26:20- The brain operates better at this temperature. - Some people wear hats, even!
0:26:20 > 0:26:27'It may appear rather dull, but the designs generated in this room shape the future of computing.'
0:26:27 > 0:26:33- Some of the guys are hopefully doing some work. - 'ARM started in the early '80s,
0:26:33 > 0:26:37'designing small, but powerful chips for British home computers.'
0:26:37 > 0:26:41- And actually this chip here... - No touch screen.- No, no, no.
0:26:41 > 0:26:48- This is the first ARM processor. - 'The chips had potential for small portable products
0:26:48 > 0:26:53'and drew the attention of a US computer company.'
0:26:53 > 0:26:58Along came Apple, actually, in 1990 wanting to create the Newton, the world's first PDA.
0:26:58 > 0:27:04Here we've got a Newton. This is why ARM the company was created.
0:27:04 > 0:27:09And now, you know, you could look at that and think that's the iPhone. It's a bit bigger.
0:27:09 > 0:27:16- Hello.- It was a bit too slow and a bit too heavy, but that was the vision behind this product.
0:27:16 > 0:27:20Then, in the mid-'90s, the mobile phone revolution started.
0:27:20 > 0:27:25And Nokia was the first company to adopt our technology.
0:27:25 > 0:27:28And ARM power is in...
0:27:28 > 0:27:31ARM is in pretty much every mobile phone, yeah.
0:27:31 > 0:27:37- And as the phones become more sophisticated, they have more chips. - Yeah, absolutely.
0:27:37 > 0:27:43Something like the iPhone or these smart phones have an awful lot of ARM technology in them.
0:27:43 > 0:27:49You've got chips in an iPhone. Without giving away your commercial secrets, what are Apple paying you?
0:27:49 > 0:27:52Remember, we don't make the chips.
0:27:52 > 0:27:57We license our designs to semi-conductor companies. For that we get a licence fee.
0:27:57 > 0:28:03When they make the chips and sell them to Apple or whoever, they pay us a royalty.
0:28:03 > 0:28:10- We get a few cents off each chip. It's not huge...- No, but...- In the last year, 6 billion ARM chips.
0:28:10 > 0:28:15You add all that up, it means the company is doing very well.
0:28:15 > 0:28:23- You don't at any point feel, "It's sad that we don't make the chip. Maybe we should."- Not at all.
0:28:23 > 0:28:30We don't want to manufacture. You have to build a factory that costs you 5 billion to start.
0:28:30 > 0:28:36It's a hugely expensive game. We have no expertise in that. Other companies are much better.
0:28:36 > 0:28:40We're damn good at what we do and that's what we want to keep doing.
0:28:40 > 0:28:46'It's right, of course, to concentrate on the high-value work and it's a huge contributor
0:28:46 > 0:28:52'to the UK economy, but it does signal a problem with the intellectual property industry.
0:28:52 > 0:28:58'Only the very cleverest can earn a living in it. We're not all as brainy as these guys.'
0:28:58 > 0:29:03Come in here on the left and we'll see an office with real hardware.
0:29:03 > 0:29:07'It raises the issue of how the rest of us contribute to the economy,
0:29:07 > 0:29:11'how big we need our unintellectual property industries to be.'
0:29:11 > 0:29:14Ah, the playroom, the playroom.
0:29:14 > 0:29:20Yes, it's playing in a way, but there are some semi-serious outcomes from the sort of thing we do.
0:29:21 > 0:29:24So this is some Lego
0:29:24 > 0:29:29that one of our guys here has created and built. It's a Rubik's Cube solver.
0:29:29 > 0:29:33To begin with, the phone is using its camera.
0:29:33 > 0:29:39It's pointing downwards to take an image of each of the faces of the cube and it works out the solution.
0:29:39 > 0:29:44Would you like to race it, Evan? Here's a cube that I scrambled just now.
0:29:44 > 0:29:48I have a feeling your system will be better than mine.
0:29:48 > 0:29:50On your marks, get set, go.
0:29:50 > 0:29:52Well...
0:29:52 > 0:29:55I think it's going to win.
0:29:55 > 0:30:00The key is to think of them as cubes, rather than as surfaces, I think, isn't it?
0:30:06 > 0:30:08OK, he's won.
0:30:14 > 0:30:16Very nice. Very nice.
0:30:16 > 0:30:22So, hopefully, you'll remember how to fly this. I'll pop it down about here. Here we go.
0:30:22 > 0:30:28So we've got these ARM chips in so many different objects, you wouldn't...
0:30:28 > 0:30:35'ARM has evolved from being at the centre of one of the most rapidly growing industries - mobile phones
0:30:35 > 0:30:39'to being partners of the computing world's giants.'
0:30:39 > 0:30:41- Up...- Ah, there we go.
0:30:41 > 0:30:45'Warren East is the chief executive of ARM Holdings.'
0:30:45 > 0:30:49You are friends of, partners to all the big ones -
0:30:49 > 0:30:52Google, Apple, Microsoft,
0:30:52 > 0:30:57the three behemoths of American software, hardware culture.
0:30:57 > 0:31:02- You're there with all of them. - That's absolutely the philosophy of our business model.
0:31:02 > 0:31:05We enable and we don't pick winners.
0:31:05 > 0:31:09We believe sharing a slice of a very big pie
0:31:09 > 0:31:13is a lot better than having the whole of a much smaller pie.
0:31:13 > 0:31:16Come on, come back, come back.
0:31:16 > 0:31:23'ARM's strength has been built around having a highly skilled and highly educated workforce.
0:31:23 > 0:31:27'It's no coincidence that it's found in Cambridge.
0:31:31 > 0:31:37'These old colleges are the key to Britain's modern success in research and science.
0:31:37 > 0:31:42'Universities help companies innovate and the economy reaps the reward.
0:31:42 > 0:31:48'That clustering effect, it works in our favour in that great chase that is the global economy.
0:31:48 > 0:31:52'Top talent likes to move to where other top talent is,
0:31:52 > 0:31:56'so the more success you have, the more success you get.'
0:31:58 > 0:32:04Now, the great hope for the British economy is that we remain front-runners
0:32:04 > 0:32:07at this whole business of creating intellectual property.
0:32:07 > 0:32:13That hope rests on the fact that it is quite hard for other countries to catch up with us,
0:32:13 > 0:32:19so a country like China can come to the west and buy a factory, remove it lock, stock and barrel,
0:32:19 > 0:32:23take it back home and replicate exactly what we're doing,
0:32:23 > 0:32:26but could it come and buy this?
0:32:26 > 0:32:31What is it? It's an academic business network. It's hard to get your hands on it.
0:32:36 > 0:32:40Clustering is great for the UK and it's great for Cambridge.
0:32:40 > 0:32:45But there is a problem. Clusters suck in resources from elsewhere,
0:32:45 > 0:32:51so while Cambridge is packed with top-class firms, it's left other parts of the UK behind.
0:32:51 > 0:32:55The economy clearly needs jobs elsewhere -
0:32:55 > 0:32:59good industries in every corner of the land, to use all of us,
0:32:59 > 0:33:01all the resources at hand.
0:33:04 > 0:33:10Well, we've seen how our economy has evolved towards the science end of the value chain.
0:33:10 > 0:33:14Now we have to see how and why we've made another move over the decades
0:33:14 > 0:33:17to the other end of the value chain
0:33:17 > 0:33:21where marketing, advertising and branding put the creative icing
0:33:21 > 0:33:23on the manufactured cake.
0:33:47 > 0:33:52When people enjoy a good education, they become more affluent.
0:33:52 > 0:33:55Their whole way of consuming changes.
0:33:55 > 0:33:59They have more time. They can afford more than basic subsistence.
0:33:59 > 0:34:04They begin to think about self-expression and what they say about themselves.
0:34:04 > 0:34:11Fairtrade chocolate - it tells me that I care about other people or that I can afford to care.
0:34:11 > 0:34:15The Italian and the Brazilian menu choices tell me how worldly I am.
0:34:15 > 0:34:18The newspapers remind me how clever I am.
0:34:18 > 0:34:24Then we have the dazzling array of different coffee choices which says so much about oneself.
0:34:24 > 0:34:28I'll have a mocha with white chocolate, please.
0:34:35 > 0:34:41It's a funny thing, but the more affluent and the more educated consumers are,
0:34:41 > 0:34:43the more frivolous they tend to look.
0:34:43 > 0:34:49They seem to be more worried about the froth on the cappuccino than the coffee itself, and why not?
0:34:49 > 0:34:53If you've got enough coffee, maybe it's a bit of froth that you want.
0:34:53 > 0:34:57But there's a really interesting feature of modern economies.
0:34:57 > 0:35:01They tend to respond to those kinds of consumers.
0:35:01 > 0:35:06They adapt and produce things to serve the more trivial needs that rich consumers have.
0:35:06 > 0:35:12Douglas Adams puts it rather well in The Hitchhiker's Guide To The Galaxy. I'll paraphrase his line.
0:35:12 > 0:35:18"There are three phrases of human development - will I eat, what will I eat and where shall we do lunch?"
0:35:18 > 0:35:21Well, Britain is in phase three.
0:35:39 > 0:35:42Visit a supermarket in Britain or any advanced economy
0:35:42 > 0:35:47to see how much effort in rich countries goes into marketing,
0:35:47 > 0:35:50packaging and all the fripperies attached.
0:35:50 > 0:35:54They may be frivolous, but they're valuable activities,
0:35:54 > 0:35:58elevating bog-standard commodities into something special.
0:36:00 > 0:36:04Right, let me walk down the biscuit mile. There are so many biscuits.
0:36:04 > 0:36:07Chocolate Orange Viennese Biscuits,
0:36:07 > 0:36:12Plain Chocolate Butter Biscuits, Oreos, of course, Digestives.
0:36:12 > 0:36:15How much shortbread does a society need?
0:36:15 > 0:36:21Choc Chip Shortbread Rings. Why have a hole in a piece of shortbread? What difference does that make?
0:36:21 > 0:36:24It makes it more pleasurable to eat, doesn't it?
0:36:24 > 0:36:29It costs the manufacturers a lot, offering this proliferation of biscuit choices.
0:36:29 > 0:36:35But it makes money because enough consumers shun the cheaper, boring options.
0:36:35 > 0:36:38Because so many of our basic needs are fulfilled,
0:36:38 > 0:36:42we tend to worry less about quantity and functionality these days
0:36:42 > 0:36:46and more about the aesthetics of the products we buy,
0:36:46 > 0:36:49the packaging, the meaning they give us.
0:36:50 > 0:36:55Adding value through marketing innovation is one of Britain's strengths.
0:36:55 > 0:36:59Just as much as the work of a Glaxo lab or a Cambridge business park,
0:36:59 > 0:37:03this is the natural direction for our economy to have taken.
0:37:04 > 0:37:10Every single item is designed to appeal to somebody, to add a little bit of colour to their life,
0:37:10 > 0:37:13to give them a little bit of identity.
0:37:13 > 0:37:15My favourite is down here.
0:37:15 > 0:37:18Here we go - Skinny Water
0:37:18 > 0:37:24with the bottle in a nice, skinny shape as well for people who are concerned about their shape.
0:37:24 > 0:37:30As the world becomes more affluent, so consumers want more sophisticated products.
0:37:30 > 0:37:33We shouldn't regret being big players in the industries
0:37:33 > 0:37:37like design, marketing and advertising that serve these tastes.
0:37:37 > 0:37:41Exporting these skills helps us pay our way in the world.
0:37:49 > 0:37:55Britain's strength in this area goes right back to the 19th century.
0:37:55 > 0:37:59Sunlight Soap was one of the country's great exports,
0:37:59 > 0:38:02working its way into the far corners of the world.
0:38:02 > 0:38:08# As long as my sweetie is by my side, doing the dishes with me Now there's no moonlight... #
0:38:08 > 0:38:14It transformed humble Wirral grocers William and James Lever into multi-millionaires.
0:38:15 > 0:38:21Back in 1884, instead of cutting slices of soap from blocks,
0:38:21 > 0:38:25they pre-wrapped it and branded it Sunlight Soap.
0:38:25 > 0:38:30It was their guarantee that each bar was of the same standard as the last
0:38:30 > 0:38:32and this idea was a roaring success.
0:38:34 > 0:38:38In 1886, they were producing 1,000 tons of soap a year.
0:38:39 > 0:38:44Ten years later, it had risen to 40,000.
0:38:45 > 0:38:48By the 1930s, it was the largest company in Britain.
0:38:51 > 0:38:55And today, as the global corporation Unilever,
0:38:55 > 0:38:59it continues to produce some of our biggest brands.
0:39:06 > 0:39:09A lot of people are apt to think it's all fluff.
0:39:09 > 0:39:14How can a nation earn a living or pay for its imports through marketing?
0:39:14 > 0:39:20It may not make a living for everybody, but it can certainly make a lot of money.
0:39:20 > 0:39:23There's a revealing tale of the takeover of a company
0:39:23 > 0:39:27that's been one of Britain's best brand inventors,
0:39:27 > 0:39:33the company behind one of our greatest contributions to the world of confectionery - the Kit Kat.
0:39:33 > 0:39:36That company was Rowntree.
0:39:36 > 0:39:41In 1988, it was fought over by two Swiss food giants -
0:39:41 > 0:39:45Nestle and Suchard who wanted to buy it.
0:39:45 > 0:39:49After a long boardroom battle, a selling price was finally agreed
0:39:49 > 0:39:52that had the value of the brands at its heart.
0:39:55 > 0:40:01Rowntree, the British firm who make Kit Kat and Smarties, are to be bought by Nestle,
0:40:01 > 0:40:04the Swiss food giant who make Milkybars.
0:40:04 > 0:40:09The successful bid topped all earlier offers at over £2.5 billion.
0:40:09 > 0:40:11- Morning.- Morning.
0:40:16 > 0:40:22Rowntree's factories and machinery and so on were valued at half a billion pounds.
0:40:22 > 0:40:27The value added by the brands accounted for much of the additional two billion.
0:40:27 > 0:40:31If you look at the manufacturing base or buildings alone,
0:40:31 > 0:40:34that doesn't explain at all the final price.
0:40:34 > 0:40:38It's all to do with Nestle looking at those brands and thinking,
0:40:38 > 0:40:42with these properties, we can build a big, successful, global franchise.
0:40:44 > 0:40:47Nestle paid handsomely for the brands.
0:40:47 > 0:40:53Britain pocketed the money and Nestle's investment in them has taken that old British Kit Kat
0:40:53 > 0:40:58into global markets that previously it couldn't afford to reach.
0:41:01 > 0:41:05Today, the seemingly innocuous snack bar has become a global super brand.
0:41:07 > 0:41:14Dubai Airport has the privilege of being the single largest place where Kit Kats are sold in the world.
0:41:14 > 0:41:18Over a tonne of Kit Kats are sold in Dubai Airport every single day.
0:41:21 > 0:41:28'17 billion Kit Kat fingers are sold every year in 70 countries. That's more than any other confectionery.
0:41:28 > 0:41:33'Even under Swiss control, Britain continues to earn money from it.
0:41:33 > 0:41:39'Nestle invested in an R&D lab in York and the city still makes a billion Kit Kat bars a year,
0:41:39 > 0:41:45'a formidable demonstration of the value of a brand and its potential for export too.
0:41:49 > 0:41:53'So we've seen why there's an impeccable economic logic
0:41:53 > 0:41:59'in Britain specialising in the high value ends of the value chain,
0:41:59 > 0:42:01'the science bit and marketing.
0:42:01 > 0:42:04'It made us rich, but here's the bad news.
0:42:04 > 0:42:07'It hasn't made us rich enough.
0:42:07 > 0:42:13'There's a gap between what we've been buying from abroad and what we've been able to sell
0:42:13 > 0:42:15'and now we have bills to be paid.'
0:42:15 > 0:42:20Hello, could you take me to China, please? That would be terrific.
0:42:23 > 0:42:29'Now I want to see how much further our brainpower and creativity can go to help close the gap.
0:42:29 > 0:42:35'With many millions of new, affluent middle class, China is the place our brands should be heading.
0:42:56 > 0:43:00'Despite appearances, this isn't Reading or Basingstoke
0:43:00 > 0:43:03'or any other British town.
0:43:03 > 0:43:09'This is Thames Town on the outskirts of Shanghai.
0:43:16 > 0:43:20'It was a commercial venture built by Chinese speculators
0:43:20 > 0:43:26'who used British architects Atkins to create a traditional British town.
0:43:26 > 0:43:32'But when the rail link to it was cancelled, it became more of a ghost town.'
0:43:32 > 0:43:37I'm sure the developers here really had intended it would be a thriving community -
0:43:37 > 0:43:41retail, accommodation, apartments, houses.
0:43:42 > 0:43:48They must be slightly disappointed that really it's a kind of glorified film set.
0:43:48 > 0:43:55Every corner you go round, there are more people taking photographs. There's another group over there.
0:43:59 > 0:44:01Churchill.
0:44:03 > 0:44:06"Corner store", just like any British corner store.
0:44:06 > 0:44:09And next door to the "Apoolo".
0:44:09 > 0:44:12It's sort of almost there, isn't it? Just...
0:44:12 > 0:44:14Just not quite.
0:44:16 > 0:44:22I mean, this place brings up a bit of a worry I have about British brands and their success here,
0:44:22 > 0:44:28a worry that Britain is somehow seen as a rather sort of exotic backdrop, a curiosity,
0:44:28 > 0:44:31rather than a driving, modern economy.
0:44:31 > 0:44:35Certainly we can sell, certainly we're good at marketing,
0:44:35 > 0:44:40but the worry is that we're slightly better at marketing to ourselves
0:44:40 > 0:44:43than we are outside of our own country.
0:44:47 > 0:44:52'But it doesn't take long in China to find one bit of encouraging news.'
0:45:00 > 0:45:02Xiexie.
0:45:07 > 0:45:09Hmm!
0:45:10 > 0:45:13There are so many teas in China.
0:45:13 > 0:45:17There's one here that's good for the eyes.
0:45:17 > 0:45:22There's one that reduces the symptoms of excess internal body heat.
0:45:22 > 0:45:25The one I've got is a cleansing tea,
0:45:25 > 0:45:28a sort of Chinese detox.
0:45:28 > 0:45:31But of all the teas in China,
0:45:31 > 0:45:36guess which outsells its nearest rival by two to one?
0:45:36 > 0:45:38A little bit of show and tell here.
0:45:38 > 0:45:43Yes, it's Lipton from Unilever.
0:45:44 > 0:45:50The Chinese buy around 300 million pounds of Lipton's tea every year.
0:45:50 > 0:45:56If we can sell tea to the country that gave it to the world, surely we can sell anything.
0:45:59 > 0:46:03Looking around, there are some successes here,
0:46:03 > 0:46:06such as the luxury brand Rolls-Royce and Burberry.
0:46:06 > 0:46:11And retail giants Tesco's and Marks & Spencer have also got a foothold.
0:46:11 > 0:46:14Does that mean we can sell anything?
0:46:14 > 0:46:17A test of how our brands are doing
0:46:17 > 0:46:22is to see if they're getting into the homes of the burgeoning middle classes.
0:46:22 > 0:46:26As we've seen in Britain, a rise in education and affluence
0:46:26 > 0:46:29leads to a more sophisticated consumer culture
0:46:29 > 0:46:32and this is happening in China now.
0:46:32 > 0:46:35These are the people we should be targeting our brands at.
0:46:45 > 0:46:47COMMENTARY IN CHINESE
0:46:49 > 0:46:54'This is Yuan Ming. She does what I do. She presents business programmes.
0:46:54 > 0:46:59'She also hosts Call Me Boss, the Chinese equivalent of Dragons' Den.'
0:46:59 > 0:47:01CONVERSATION IN CHINESE
0:47:03 > 0:47:05APPLAUSE
0:47:05 > 0:47:08'But where my programmes reach a few million,
0:47:08 > 0:47:12'Yuan Ming's are seen by tens of millions.'
0:47:12 > 0:47:17- Hello.- Hello. Yuan Ming?- Hi. - I'm Evan. Lovely to see you.
0:47:17 > 0:47:23'Who better to find out if British brands are reaching the affluent classes?'
0:47:23 > 0:47:25Come in, please.
0:47:25 > 0:47:28CONVERSATION IN CHINESE
0:47:34 > 0:47:37- I want a bit of a snoop around. - Why?
0:47:37 > 0:47:42I want to see what sort of brands you buy, whether you're a bit of a fashion person.
0:47:42 > 0:47:46No, I'm not. Well, I'm a gadget maniac. You see, I have an iPad.
0:47:46 > 0:47:49Yeah, I've already seen number one there.
0:47:49 > 0:47:55Maybe we have something in the refrigerator. This is... No, this is from France, I guess.
0:47:55 > 0:48:02- Let's see what we have... - Tsingtao beer.- Champagne. - Oh, champagne, French. Nice.
0:48:02 > 0:48:05- Orange juice. - Oh, we have some...- Spanish.
0:48:05 > 0:48:10This is depressing. You've got something from everywhere apart from Britain.
0:48:10 > 0:48:13I'll try to find some British one.
0:48:13 > 0:48:16- No.- No, it's not very British, is it?
0:48:16 > 0:48:22- No, it's slightly depressing... - What do we have?- I don't know. This is what my quest is to find out.
0:48:22 > 0:48:25I have Laura Ashley and also I have some Earl Grey.
0:48:25 > 0:48:30Phew, we got there, we got there! Laura Ashley. Thank you, Laura.
0:48:30 > 0:48:35- I'd love to hear what your mum thinks.- OK.- I mean, Rolls-Royce, not the car...
0:48:35 > 0:48:38CONVERSATION IN CHINESE
0:48:40 > 0:48:42My mum says, "Is it British?"
0:48:42 > 0:48:46She said, "Is it British?" Oh, how could you not know?
0:48:50 > 0:48:55Can we eat another dumpling, by the way? We've slightly ignored the...
0:48:55 > 0:48:59'My overriding impression is what a small player we are.
0:48:59 > 0:49:02'It's hard work finding British products.
0:49:02 > 0:49:07'I know we sold around £8 billion of exports to the Chinese in 2009
0:49:07 > 0:49:13'and the figure's growing, but it's not much, considering their £3 trillion economy.
0:49:15 > 0:49:21'We aren't selling enough yet and the evidence in China is that it's not going to get any easier
0:49:21 > 0:49:24'because China itself is changing.
0:49:24 > 0:49:28'Remember the chase - some countries advance, others follow?
0:49:28 > 0:49:33'Just as we concentrated on the most valuable sections of the value chain,
0:49:33 > 0:49:36'that's exactly what the Chinese are beginning to do
0:49:36 > 0:49:40'as their economy develops away from low value manufacturing.
0:49:51 > 0:49:57'Look at this advert for trainers from a Chinese sports manufacturer, Li-Ning.
0:49:57 > 0:50:00'It was made in fact by a British ad agency,
0:50:00 > 0:50:06'but China clearly wants to own the brands, as well as make the footwear.'
0:50:07 > 0:50:11Thank you very much. Brilliant. Lovely.
0:50:13 > 0:50:17'I've come to Li-Ning's flagship store in Shanghai
0:50:17 > 0:50:22'to see if China is catching up with the west in developing sophisticated brands.
0:50:24 > 0:50:27'Cindy Wu is head of brand development.'
0:50:29 > 0:50:33- Cindy Wu?- Yes.- Hello. Evan Davis. Nice to meet you.- Nice to meet you.
0:50:33 > 0:50:35- Lovely store.- Welcome to our store.
0:50:35 > 0:50:40So how long has it been like this? Is this brand-new?
0:50:40 > 0:50:46- Yes, this is actually our new flagship store in Shanghai.- It looks a little bit like Nike Town.
0:50:46 > 0:50:51Did you go to a Nike Town store and think, "Let's make it look like that"?
0:50:51 > 0:50:57We just want to establish our own flagship stores which could represent our brand.
0:50:57 > 0:51:00'This place looks good, if slightly familiar,
0:51:00 > 0:51:04'but can Li-Ning do anything more than copy western brands?'
0:51:05 > 0:51:09Now, you've got to tell me about this swoosh, Cindy.
0:51:09 > 0:51:12We've got this swoosh.
0:51:12 > 0:51:17- First of all, we don't call it a swoosh.- No, that's what Nike call theirs.- We call it a logo.
0:51:17 > 0:51:21And you can see that there's actually a difference.
0:51:21 > 0:51:25This is our original logo and this is our new logo.
0:51:25 > 0:51:30You admit that one looks a bit like some other logos, but this one is a bit more original?
0:51:30 > 0:51:33Really? They come from different inspirations.
0:51:33 > 0:51:38That one was inspired by the Chinese red flag flying on the podium
0:51:38 > 0:51:43and this new logo came from one of the actions of our founder.
0:51:43 > 0:51:49- He was a gymnast and he has an action named after himself with his feet... - Oh, a position. Right, right.
0:51:49 > 0:51:54- There's something I want to ask you about these shoes over here.- Sure.
0:51:54 > 0:51:57'They've got the branding bit. What about the science?'
0:51:57 > 0:52:03If you go to one of the established, big manufacturers that we're all used to,
0:52:03 > 0:52:08they have teams of people designing these, so they're really good for the feet.
0:52:08 > 0:52:13Now, are yours just bits of sort of plastic and fabric or are they designed?
0:52:13 > 0:52:16Have you got scientists working on them?
0:52:16 > 0:52:23We have a lab established in Beijing and also our global innovation centre in Portland in the USA.
0:52:23 > 0:52:26So you really are putting a lot of money into...
0:52:26 > 0:52:32We believe that to become a world-class sports brand, we have to own our own technology.
0:52:32 > 0:52:35'They've also got the ambition.'
0:52:35 > 0:52:39We have gone through a lot of R&D product design plans
0:52:39 > 0:52:44to prepare ourselves to be one of the top five brands by 2018.
0:52:44 > 0:52:46Top five Chinese brands?
0:52:46 > 0:52:51- No, top five sporting goods brands in the world.- Right.
0:52:51 > 0:52:56So you really do have plans to be conquering the world.
0:52:56 > 0:52:59I mean in a good, commercial way. Sorry.
0:52:59 > 0:53:04'Although I'm taken aback by what I'm seeing, I shouldn't really be surprised.
0:53:04 > 0:53:10'We've moved beyond "pile 'em high and sell it cheap". Why shouldn't they follow us?'
0:53:10 > 0:53:12You are profitable as a company?
0:53:12 > 0:53:17Or are you still investing in it so much that you're not making any money?
0:53:17 > 0:53:19We are profitable.
0:53:19 > 0:53:26In 2009, we have made 8.3 billion RMB in our revenue.
0:53:26 > 0:53:308.3 billion - that's about £830 million.
0:53:30 > 0:53:33- Yes, more or less.- That's a lot.
0:53:33 > 0:53:36And then we made 0.9 billion RMB revenue.
0:53:36 > 0:53:41- £100 million of...of profit, of profit.- Of profit.
0:53:41 > 0:53:45- Crumbs!- Yeah, profit.- That puts you in quite a big league, actually.
0:53:45 > 0:53:49I wonder whether we in the west should be terribly worried
0:53:49 > 0:53:55because we've been waiting for China to be rich enough for us to sell lots of things into China
0:53:55 > 0:54:00and the day you become rich enough for us to start selling loads of things to you,
0:54:00 > 0:54:04pay back all the money we borrowed from you in the last ten years,
0:54:04 > 0:54:11you'll be selling all this nice, fashionable stuff to yourself. Crumbs! What are we going to do?
0:54:11 > 0:54:15'And that's a question many people are asking.
0:54:15 > 0:54:21'What happens when the next hip chocolate bar is Chinese, not British?
0:54:21 > 0:54:26'We might have been great at inventing things in the past,
0:54:26 > 0:54:29'but why shouldn't others be as good as us in the future?
0:54:29 > 0:54:34'National champions like GlaxoSmithKline run out in the front now...
0:54:36 > 0:54:39'..but companies elsewhere are chasing behind.'
0:54:42 > 0:54:46We run constantly with that feeling just behind our neck
0:54:46 > 0:54:52that if we don't succeed on the next round, you aren't going to be here in 15 or 20 years' time
0:54:52 > 0:54:56and in many ways that creates the energy in the organisation.
0:54:59 > 0:55:03There are no guarantees. There is no 11th commandment which says,
0:55:03 > 0:55:07"There should be a drug company in Britain called GlaxoSmithKline."
0:55:12 > 0:55:17You'd better succeed because if you don't, nothing will save you.
0:55:21 > 0:55:23But there's no need to be alarmed.
0:55:23 > 0:55:26From what I've seen, at our best,
0:55:26 > 0:55:29we're among the world's best.
0:55:31 > 0:55:33UK designers are very good.
0:55:33 > 0:55:38They're very versatile, problem-solving types.
0:55:38 > 0:55:44The world changes, the problems to be solved change. New industries come, old industries go.
0:55:44 > 0:55:46The UK can't do everything.
0:55:46 > 0:55:51It has to focus on the highest value activities it can find.
0:55:53 > 0:55:56The best answer comes from a blend
0:55:56 > 0:56:02of some of that British problem-solving mentality,
0:56:02 > 0:56:06together with some specialist, but quite narrow expertise
0:56:06 > 0:56:12that you find in engineers in some other regions of the world, for example, in America.
0:56:13 > 0:56:17We can't be complacent, but our whole economic history
0:56:17 > 0:56:22is one of running to stay ahead and getting richer in the process.
0:56:22 > 0:56:24It's no different now.
0:56:24 > 0:56:27It all comes back to the value chain.
0:56:27 > 0:56:33As the world changes, as other countries get richer, new opportunities arise.
0:56:33 > 0:56:40We have to find new nooks and crannies which best use our skills and will enable us to pay our way.
0:56:40 > 0:56:45Britain is in the global top division when it comes to science and creativity
0:56:45 > 0:56:51and the income they generate will continue to pay many of the country's bills.
0:56:54 > 0:56:57But one important observation -
0:56:57 > 0:57:02we can never be entirely reliant on intellectual property alone.
0:57:02 > 0:57:07That reminds me of those old sci-fi movies where there's some evil brain in a jar,
0:57:07 > 0:57:10trying to survive without any kind of body.
0:57:10 > 0:57:12We don't want to be like that.
0:57:12 > 0:57:16We need people who are not cut out to wear white coats in laboratories
0:57:16 > 0:57:19or black collars in advertising agencies.
0:57:19 > 0:57:25We need them to be productive as well. We need regions which don't have clusters of knowledge workers.
0:57:25 > 0:57:28We need them to have industries of their own.
0:57:28 > 0:57:33We want to be clever, but we don't ONLY want to be clever.
0:57:35 > 0:57:37'Next time on Made In Britain,
0:57:37 > 0:57:41'our services economy where over three-quarters of us work.
0:57:41 > 0:57:44'From call centres in Sunderland...'
0:57:45 > 0:57:49- This is a bedroom or a lounge? It is a bedroom.- It is a bedroom.
0:57:49 > 0:57:51'..to estate agents in London.
0:57:51 > 0:57:55'Can this help us pay our way in the world?'
0:57:55 > 0:57:58- Very nice indeed. - Again the views over the park...
0:57:58 > 0:58:02To discover more about how Britain pays its way in the world
0:58:02 > 0:58:07and to contribute your own experiences to the Open University's online toolkit, visit...
0:58:10 > 0:58:14And follow the link to the Open University.
0:58:32 > 0:58:37Subtitles by Subtext for Red Bee Media Ltd 2011
0:58:37 > 0:58:40Email subtitling@bbc.co.uk