Britain sinks to 18th place on competitiveness table

Economy: Report highlights deteriorating skills performance, education and attitudes to work

DIANE COYLE

Economics Correspondent

Taiwan, Finland, Canada and Australia have overtaken Britain in the international competitiveness league.

Britain has fallen to 18th place, scraping ahead of countries such as Chile, Malaysia and Korea, and behind Norway and Sweden as well as the more obvious candidates for global economic leadership.

The US has increased its lead this year, according to the annual World Competitiveness Report, published today by Swiss business school IMD and the World Economic Forum. Japan, toppled from the number one slot by America last year, has been pushed down to fourth place this year by Hong Kong.

There were two falls down the ratings more pronounced than Britain's. Mexico and Turkey were the biggest movers due to their respective financial crises and social unrest.

The competitiveness report makes compulsive reading. Its 800 pages contain enough detail to satisfy the most ardent student of Britain's national economic decline or America's might. But its merits are challenged by Paul Krugman, an eminent MIT economist, in the latest edition of Worldlink, the house journal of the World Economic Forum, a business network. He argues that "competitiveness" is a meaningless term. Standard economic concepts provide the tools for analysing changes in the world economy, he says.

Professor Krugman adds that the notion of competitiveness can be dangerous, fostering the rhetoric of international trade as a battle some countries must lose and some win, thereby fuelling protectionist interests.

Professor Krugman's in-house platform to criticise the report this year follows his high-profile attack on last year's rankings, when America's success in ejecting Japan from the number one slot was greeted with much fanfare. The World Economic Forum has offset his views this year with a reply from an equally eminent Harvard economist, Jeffrey Sachs. Professor Sachs argues that adding non-economic factors such as political influences, managerial talent and a country's capacity to innovate do make competitiveness a useful concept.

The US advanced its lead in the competitiveness league table this year thanks to more deregulation, cheaper labour costs and its leadership in new technologies such as computing and biotechnology.

The danger, according to the report, is that social tensions will undermine America's competitive advance. It warns that the polarisation between earnings in efficient, internationally competitive businesses and low- wage service jobs could lead to instability.

Japan's slide down the ratings is explained by its economic crisis and also by social and political tensions. In particular, the Japanese have gone from being one of the nations most satisfied about its government to one of the least happy.

According to Stephane Garelli, a professor at IMD and director of the world competi- tiveness project, competitiveness has a social as well as an economic dimension. Japan is in the midst of a social and political crisis like the one that hit the US and Europe in the late 1960s, he argues. "It is the capacity to make decisions in a society which is important. Many societies are blocked," he said.

The explanation for Britain's decline down the hit parade this year was more mundane. A weak performance in four of the eight categories that make up the overall ranking accounted for it. The countries ranked just below Britain could easily overtake it next year, Professor Garelli said.

The IMD researchers rated the British economic performance weaker due to the slowdown in growth since last year, weak investment and saving and the erosion of the country's manufacturing base during the past five years.

Professor Garelli said deregulation and improvements in efficiency had affected only a small part of the economy. Two-thirds of the economy was still inflexible and inefficient.

British management performance received a poor rating on measures such as public trust of companies (38th out of the 48 countries surveyed) and companies' sense of social responsibility. Managers had also been less successful at delivering productivity gains and cost savings than the previous year.

A third area of concern was the national infrastructure. Businesses gave the thumbs-down to urban planning and the transport system, and said levels of infrastructure investment were inadequate.

However, Britain stands out for a relatively strong lead in telecommunications and computers - particularly in comparison with other European countries. It is number seven in the number of computers per capita and number four in its share of total world-wide computing power.

Despite this technological advantage, one of Britain's biggest weaknesses is an education system that is not up to training people in the skills required by high-tech industries. Professor Garelli said: "The UK is developing the industries of the future but not the people to work in them." Britain trails in the bottom half of the league table in measures such as the percentage of young people in higher education and teacher-pupil ratios.

The report highlights the country's steadily deteriorating performance in skills, the education system and attitudes to work as the biggest threat to international competitiveness.

Comment, page 19

Arts and Entertainment
books
Voices
Caustic she may be, but Joan Rivers is a feminist hero, whether she likes it or not
voicesShe's an inspiration, whether she likes it or not, says Ellen E Jones
Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Sport
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
PROMOTED VIDEO
Life and Style
3D printed bump keys can access almost any lock
techSoftware needs photo of lock and not much more
Arts and Entertainment
The 'three chords and the truth gal' performing at the Cornbury Music Festival, Oxford, earlier this summer
music... so how did she become country music's hottest new star?
Life and Style
The spy mistress-general: A lecturer in nutritional therapy in her modern life, Heather Rosa favours a Byzantine look topped off with a squid and a schooner
fashionEurope's biggest steampunk convention heads to Lincoln
News
Dr Alice Roberts in front of a
peopleAlice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
News
i100
Arts and Entertainment
Star turns: Montacute House
tv
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Arts and Entertainment
Unsettling perspective: Iraq gave Turner a subject and a voice (stock photo)
booksBrian Turner's new book goes back to the bloody battles he fought in Iraq
News
The Digicub app, for young fans
advertisingNSPCC 'extremely concerned'
News
i100
Arts and Entertainment
Some of the key words and phrases to remember
booksA user's guide to weasel words
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Day In a Page

The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

Kacey Musgraves: Nashville's hottest new star

The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

Soldier-poet Brian Turner on his new memoir

James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

Villa were not surprised that Vlaar was a World Cup star

Andi Weimann reveals just how good his Dutch teammate really is
Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

Bill Granger's simple Italian salads

Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
The Last Word: Tumbleweed through deserted stands and suites at Wembley

The Last Word: Tumbleweed through deserted stands and suites at Wembley

If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution