Big economies focus on globalisation as key to prosperity after slump

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The Independent Online

The world's 60 largest economies have now put the recession behind them and embarked on another phase of the globalisation that has marked the past 20 years, a report published today will say.

The research, from the City accountancy firm Ernst & Young and the Economist Intelligence Unit, suggests that while the globalisation trend stalled briefly during 2009, as countries turned inwards in the face of economic pressures, convergence has begun afresh.

Steve Varley, markets leader at Ernst & Young, said the extent to which markets for goods and services were now international meant that businesses had no choice but to embrace globalisation – and that countries giving in to protectionist instincts were likely to suffer.

"The enormous opportunities in emerging markets, the ever increasing power of technology and a gradual international economic recovery will ensure that globalisation continues to deepen over the coming years," Mr Varley said. "That said, it is incumbent on business and governments to continue to make the case for globalisation as a positive force for economic and social good and avoid any descent into protectionism."

Ernst & Young also said businesses had begun repositioning themselves to take account of the pace of international change. Nearly 70 per cent of the 1,000 large businesses across 60 markets that the accountant spoke to said they intended to increase their foreign direct investment in the years ahead. One fifth plan to increase spending by 20 per cent or more.

Emerging markets are set to be a particular focus. Around 16 per cent of companies already spend more than a quarter of their R&D budgets in emerging markets, but the figure is set to rise to 30 per cent within five years.

The accountant warned British businesses that globalisation offered both opportunities and threats. Mr Varley said: "Competition, capabilities and resources can all now reside anywhere in the world and travel in new, sometimes unexpected directions."