Outlook: Are we really that competitive?
Friday 05 June 1998
However, provided you accept the World Economic Forum's annual Global Competitiveness Report, the latest edition of which was published yesterday, for what it is, then its findings are a not unuseful addition to the legion of competing international economic assessments that struggle for attention each year. The WEF report doesn't pretend to be a conventional assessment of what is happening in economies around the world. Instead it attempts to assess their potential for growth and prosperity. Rather pleasingly, the UK has in recent years soared up the league table, rising from seventh place to fourth in the last year alone.
That puts us way ahead of many conventionally strong economies - notably Japan and Germany. Instead, we are up there with the turbo-charged US economy and, er, rather less flatteringly, with Hong Kong and Singapore. The factors that make us so are largely down to the labour and capital market reforms of the Thatcherite years. Countries like Germany and France score highly on infrastructure, technology and management, but they score poorly on labour flexibility and government policy. The more open and free market orientated an economy, the more likely it is to gain a high ranking in the WEF survey.
Rather less weight is given to the great German economic attributes - high levels of productivity and manufacturing capability - than perhaps ought to be. The WEF survey, for instance, is a total contrast to the one commissioned by the Chancellor, Gordon Brown, which showed British levels of productivity seriously trailing those of Germany and France, not just in manufacturing, but in the service sectors too. Furthermore, if Britain is truly as competitive as the WEF rankings make out, then our exchange rate, even at 3 marks to the pound and higher, could hardly be viewed as a gross overvaluation. Few people in British industry would agree with that thesis.
The real importance of the WEF survey, however, is that it probably reflects international business perceptions of what makes for a healthy economy better than any other. The competitiveness rankings incorporate a survey of senior executives from around the world and they almost without exception rate us very highly.
Perceptions are often very different from reality, of course, but don't knock it; as every job hunter knows, it is as important to be thought of as a desirable property as actually to be one. Gordon Brown, who has a tendency to run down the UK economy at every available opportunity, would do well to take a leaf out of his predecessor's book, and trumpet our labour and capital market advantages as much as he can to the international business community. It's worth a fortune in inward investment.
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