Britain is not Ready

From the war in Iran and energy shocks to AI disruption, the UK is unprepared for what is about to hit it

Towering Columns

In the New Statesman, former Downing Street foreign affairs adviser John Bew says Britain risks remaining unprepared for its “Fourth Great Disruption.”

As it stands, the likelihood of a catastrophic crisis – or at least a series of overlapping contingencies that become unmanageable – is increasing. But there is nothing inevitable about a descent into war or further anarchy. A new equilibrium is not beyond the wit of man. Nor should we give up on the idea that new norms can be established to allow us to create the conditions for domestic growth and harmony, and more stable and predictable relations between nations. On both sides of the Atlantic, an interesting conversation is beginning about what comes after the current crisis. Might a new economic and security “commons”, based around a re-contracting of interests rather than perfect ideological harmony, be possible to construct?

Yet crucially, even in this more benign scenario, we have to confront the reality that we are in a vast renegotiation of everything: the basis of social contract; the underpinnings of political economy; the legal and constitutional basis of national and international life; the division of responsibilities within our alliances; the inputs and outputs expected from the national security state; the areas of geographic focus for our diplomatic efforts; the terms of international trade; the level of tariffs, export and import controls; the foundations of our energy policy; and our ability to generate or access the benefits of the technological revolution that is the essential precondition of our future security and prosperity.

In this world, process-based punctiliousness is no substitute for being able to move things around on a map. The lesson of the past great disruptions is this: if you want to protect Enlightenment values, a dose of realism is necessary. As a young Lord Castlereagh said in 1792, at the time of the first great disruption: “The language of reason, of enlarged and enlightened policy, has not yet penetrated thoroughly the cabinets of princes. Power and importance is necessary almost to procure a hearing. I am afraid we should cut a sorry figure and exhibit an appearance not very imposing, were we to appear before them simply clad in the garb of our insular dignity and abstracted freedom.” Those words could well apply today, not least with regard to our ability to influence events in the Middle East.

For The Critic, Maurice Cousins says Sir Ed Davey’s record in office and current policies are bringing about British energy disarmament.

The result was a shift toward energy sources physically inferior to the denser and more reliable fuels they displaced. Their diffuse and intermittent nature has raised system costs and pushed Britain’s industrial electricity prices to among the highest in the developed world, driving the loss of strategic industries such as primary steelmaking and ammonia production — essential for fertiliser and explosives. It has also put new sectors like data centres and AI at a competitive disadvantage. This is disarmament — not of our armed forces, but of the nation’s energetic and industrial foundations. Yet Churchill spent much of the 1930s warning that disarmament would embolden dictators like Hitler and Mussolini.

Another catastrophic decision taken by Davey was the regulatory regime that killed Britain’s shale gas industry before it had even begun. The seismic limits he imposed on fracking made commercial extraction impossible. Davey himself later admitted the effect, saying in 2019 that the rule meant the industry “has not developed in this country at all”. Even after Russia’s invasion of Ukraine exposed Britain’s energy vulnerability, he said in 2022 that he remained “proud” of the outcome.

None of this is to suggest that Churchill himself was infallible. During his time at the Treasury in the 1920s he supported policies that weakened Britain, including the “ten-year rule” that assumed the country would not face a major war for at least a decade. Some held him partially responsible for delays of the development of Britain’s naval base at Singapore. Yet history remembers him not for his earlier errors, but for his capacity to recognise reality when it mattered most and to act decisively once the danger became clear. If Britain can forgive Churchill his mistakes and still regard him as “the greatest Englishman who ever lived”, then we can surely extend the same grace to our leaders today. But that forgiveness comes with a condition. Like Churchill, they must be willing to confront uncomfortable truths, abandon comforting illusions and take the decisions necessary to secure the country’s future. That starts with rejecting the idealistic Net Zero doctrine and embracing hard-headed energy realism.

On his Substack, Archie Hall examines the possible implications of AI for Britain’s service economy, savings patterns, dynamism and skills base.

There’s an entirely respectable career to be made in conjuring up prophecies of economic doom for Britain. The past few years have offered plenty of raw material. Still, that’s a temptation I mostly prefer to resist. Permit me, though, a brief exception—a moment to indulge my inner perma-bear. I think it’s worth the lapse. I want to air a possibility that has been troubling me for the past year: that Britain could make a real mess of the AI age. Certainly, there are plenty of great AI-adjacent British institutions, like AISI, ARIA, Arm and (further into the alphabet) DeepMind. But that does not, alone, mean that Britain’s wider economy, or its political system, is well-placed to navigate the shocks coming. On the contrary, I worry that Britain is especially exposed…

…If there is one defining fact about the British economy, it is that services dominate. That, one could fairly reply, is true of every advanced economy, no matter the hopes of the manufacturing nostalgics. But the skew to services in Britain is remarkable, even compared with its peers. No other G7 country has services made up much more than a third of total exports. In Britain, that figure is over half. That trade comes mostly in the dull, professional sectors you’d expect: banking, law, insurance and the like. Naturally, un-bylined articles about the economy comprise a small but vital slice thereof.

When tariffs started raining down, that tilt offered an under-appreciated advantage: Donald Trump doesn’t seem to believe in services and has largely exempted them from his trade war. Both of the charts above come from a piece of mine from last April, explaining why Britain was well-insulated from tariffs as a result. The same cannot be said for the impacts of AI. Here, instead, the shape of Britain’s economy leaves it vulnerable. Take a look at the chart below, which slices similar data in a slightly different way: looking at the share of Britain’s total output that is services exports—about a fifth, triple the share of 30 years ago. Expensively slinging emails across the Atlantic surely ranks high on the list of tasks that firms are already looking to automate. And when firms abroad do that automation, the productivity gains land entirely elsewhere (New York, say); Britain loses out.

On his Substack, historian Niall Ferguson asks whether the Iran-Israel conflict could be the start of World War III.

A prolonged war in the Gulf would also be a serious problem for American deterrence in the Indo-Pacific as it would run down stocks of all kinds of American weaponry that is expensive and slow to replace: not only PAC-3 magazines but also SM-6 missiles, for example. The race is on to replenish U.S. capabilities in Asia with the next generation of lower-cost, faster-made weapons: what the military men call “cheap kill.” Hypersonic missiles like Castelion’s; airframes like Divergent Technologies’; futuristic supply planes like JetZero’s; autonomous drone swarms like Auterion’s. But it is a race. And the faster the United States runs to apply the lessons of wars in Ukraine and now Iran—above all, the need for low-cost, large-scale weapons systems—the greater the risk that China decides to make its move against Taiwan now. Before we are ready.

Unlike Russia’s invasion of Ukraine four years ago, the U.S.-Israeli air war on Iran really ought to be short. However, uncertainty lingers over the Iranian regime’s resilience—the depth and breadth of its fanaticism—and its capacity to inflict enough damage to keep the Strait of Hormuz effectively closed or otherwise to reduce Gulf oil exports. Under these circumstances, as in 2022, the world’s importers of fossil fuels must scramble for scarcer and dearer resources. The longer the war lasts, the heavier the costs for Asian and European oil and gas importers, and the more money for Russia. Even if there is a swift regime alteration in Iran, the world will not swiftly revert to the status quo ante. Defense expenditures will continue to rise. Investments in the new generation of unmanned weapons systems and drone defenses will grow. There will be more, not less, nuclear proliferation. And the two superpowers will inexorably draw closer to some kind of moment of confrontation.

This year, the war in Iran probably reduces the risk of a new conflict in East Asia. But what happens in 2027 and 2028 will depend on who wins Gulf War III and how quickly they win it. Gulf War I (1990–91) was short. Gulf War II (2003–2011) was not. This isn’t World War III. But if it drags on, Gulf War II is potentially an event as significant as the 1973–74 oil shock. As well as being economically disastrous, that was one of the more dangerous moments in Cold War I. Today is best understood as an equally dangerous moment in Cold War II.

For Compact, Christopher Beha says neither Mill’s liberalism nor Yglesias’s ideal of “abundance” are sufficient for human flourishing.

One of the most salient features of contemporary American life is how anxious, depressed, isolated, angry—simply put, how unhappy—many of us are. If we take seriously the utilitarian view of happiness as the great measure of the good, this would seem to be liberalism’s most profound failure. We are unhappy although in absolute terms we remain the richest nation on the planet. We are far less happy than many far less affluent societies. We already have technological powers beyond the imagining of Bentham or Mill or even our own great-grandparents, and we are not happier than any of them. We have cut the distance from New York to London from months to weeks to days to seven hours. Will cutting it from seven to two finally deliver us from our existential distress?

What does flourishing look like for us? It is all well and good to celebrate the fact that liberalism won’t dictate an answer to that question, but many of us don’t have a satisfactory one to hand, and we are looking for some help. This is the question of meaning that led Mill to his mental collapse. He saw that the strictly quantitative utilitarianism that Bentham and his own father had preached was helpless in the face of this question.

After his mental collapse, Mill began to believe that we could, and must, distinguish between “higher” and “lower” pleasures, and that there was a greater good to be had in life than bare happiness. “It is better to be a human being dissatisfied than a pig satisfied,” he wrote; “better to be Socrates dissatisfied than a fool satisfied.” Toward the end of his life, he wrote a series of essays about religion and theistic belief. While he never became a believer, he expressed a surprising sympathy for the power of religion to give life meaning, to provide for precisely those emotional needs that his father had ignored in Mill’s upbringing.

Also for The Critic, James Price says Adam Smith’s Theory of Moral Sentiments is foundational to understanding The Wealth of Nations.

He also takes inspiration from Cicero, at one point copying a metaphor almost wholesale. In his De Officiis, Cicero uses a running competition to show the parameters of how to behave with others, even in competitive ways: “When a man runs in the stadium, he ought to strive and compete to the greatest possible extent in order to win, but he ought in no way to trip his fellow-competitor or to push him over; thus, in life, it is not unjust for anyone to pursue whatever he finds useful, but to despoil another is a violation of justice.” Smith’s version is uncannily similar: “In the race for wealth, and honours, and preferments, he may run as hard as he can, and strain every nerve and every muscle, in order to outstrip all his competitors. But if he should justle, or throw down any of them, the indulgence of the spectators is entirely at an end. It is a violation of fair play, which they cannot admit of.”

Smith showed that our moral life begins in what he called sympathy, our ability to imagine ourselves into the lives of others, and that from this natural capacity we develop conscience, and from conscience, virtues. Imagining witnessing our actions through the guise of an impartial spectator (an addition to Cicero’s concept as seen above) helps us check our behaviour.

This is how markets operate, too. If we were to lie and cheat and steal to get ahead, it may give us some temporary advantage. But if we were to continue to act in that way, we would soon find ourselves without others willing to trade with us. Again, the idea that discipline, education and example can lead people to act with tolerable decency first comes about in Smith’s earlier work, and it helps one understand the larger insights of the Wealth of Nations.

Wonky Thinking

On his blog, Professor Dieter Helm says current energy policy is making Britain more exposed to shocks like the war in Iran, not less.

It takes a crisis to reveal the underlying state of Britain’s energy insecurity, and its defence. By now we should be basking in the success of “getting out of gas”. We do after all have a lot of renewables. These, we have been told, are nine times cheaper than gas. We don’t have much nuclear left, and we have got out of coal, so all our bets are in the renewables basket. We should be well on our way now to being a “clean-energy superpower”, relying on “home-grown energy” that should be bringing down energy bills by the now legendary £300.

None of this is so far realised. Britain has the highest industrial power prices in the industrial world, so no other country is looking to it to see how they could emulate it. On the contrary, everyone else wants to work out how Britain has ended up in such an unenviable position. We turn out to be utterly reliant on foreign supply chains for the renewables and the transmission and batteries needed to deal with all this intermittent generation. It turns out that we already need twice the capacity (120GW and counting), twice the grid, and all the batteries and storage, plus lots more interconnectors to service a firm-power demand peak of 45GW – which we used to meet comfortably with just 60GW of capacity.

Having got out of coal, and betting on intermittent low-density and geographically distributed renewables, it turns out that we have become more rather than less dependent on gas for our energy security. Iran’s interruption of its LNG gas shipments out of the Strait of Hormuz and the attacks on Qatar reveal how threadbare Britain’s energy security actually is. Why, given we don’t buy LNG from Qatar? Why do we seem to be worse hit than China, Japan, India, South Korea and Taiwan, all of which buy a lot of gas from Qatar? And why, given we have very little dependency on Gulf oil, compared with China (40% of all its oil coming through the Strait of Hormuz), India (15%), and Japan and South Korea (12% each)?

China, India and Japan have little gas or oil. China and India have lots of coal, with China burning more than 55% of all the world’s coal (!), and building another 400GW of coal generation capacity – all firm power, as against China’s wind (at around 24% load factor) and solar (at around 20% load factor).

Britain should be in a much better position. It has oil and gas reserves in the North Sea, and Norway nearby to provide over 30% of Britain’s gas, and it has good wind flows in the North Sea too. It is not in the league of the world’s energy superpower: the US. The US is by far the world’s largest oil producer, and its shale gas has translated it from what was supposed to be a major importer of Qatar LNG to first self-sufficiency from its shale gas, and in the last ten years it has become the world’s greatest LNG exporter. Ten years ago, it did not export gas; 20 years ago, the shale revolution had not got going.

Why, then, is Britain in such an energy mess? Part of the answer is its gas policies. Put aside the simplistic slogans about getting out of gas, and recognise that Britain will be dependent on gas for at least another couple of decades and probably more. Because of the energy mix that has been chosen (no coal, a fast decline of nuclear, and lots and lots of intermittent renewables), it will need gas to guarantee firm electricity supplies.

Whatever the political rhetoric from the Department for Energy Security and Net Zero, this is a reality. It is even clear in the scenarios of the National Electricity System Operator (NESO). It turns out that gas is critical to the renewables policies. It is not renewables instead of gas; it is renewables and gas. Energy security depends upon it, just as it depends on all those foreign supply chains of critical minerals and especially rare earths, and on all the solar panels and wind turbines made in China and elsewhere. If the Iran war has displayed that the emperor of the clean-energy superpower has no clothes, wait to see what happens if and when China invades Taiwan.

It turns out that our energy policies have not just weakened our energy security; it is much worse, they have undermined our defence. Why? Because they have undermined our defence industries and have also exposed us to having our energy supplies adversely hit by cutting the many interconnectors we now need to keep the lights on.

On the former, high energy prices have led to a cascade of exits from energy-intensive industries, and in short order. Gone is Grangemouth, a refinery in Scotland, one in Hull, most of the steel industry, the fertiliser industry, and the fibreglass industry. Our ability to produce the petrochemicals and refined fuels is now more dependent on imports. We don’t have our own steel in the volumes and of the quality we would need for a rapid militarisation.

On the latter, it is hard to think of a way to make Britain more vulnerable to a hostile power. Let’s call it Russia. One pipeline is responsible for 30% of our gas supplies (from Norway). We have virtually no gas storage. The cables are obvious sitting ducks for cutting. The North Sea wind farms are perfect targets for swarms of drones, the new weapon of choice in aggressive attacks. And for all this we have perhaps one boat that patrols all this offshore infrastructure….

Podcast of the Week

On the Centre for Heterodox Social Science’s podcast, Eric Kaufmann and Danny Kruger discuss the philosophical foundations of modern Western politics, the limits of liberalism and the Blairite constitutional revolution.

Danny Kruger MP on the Crises of Western Society

Quick Links

London Mayor Sadiq Khan welcomed the “biggest Iftar in the Western world”, held in Trafalgar Square at the weekend.

The CEO of RenewableUK, the wind energy trade body, urged Energy Secretary Ed Miliband to restart drilling in the North Sea.

Unite, the union, also called on Miliband to end his opposition to expanding domestic oil and gas production.

A Guardian columnist received major backlash after he penned a column calling the Jewish-founded coffee shop Gail’s opening near a Palestinian cafe an act of “aggression”, appearing to defend vandalism against the branch.

One in five university students say they would not want to live with a Jewish housemate, a poll found.

A report by the Centre for Social Justice found that the UK’s low birth rate could push the state pension age to 75.

Hate crimes against Muslims are twice as likely to be prosecuted against those against Jews, according to Home Office data.

France applied pressure to the European Commission to to exclude British countries from EU contracts.