The UK slipped nine places to the eleventh spot on the closely-watched table of global competitiveness put forward last week by the respected World Economic Forum (WEF). United States regained the top spot, despite the current turbulence in its economic performance, thanks to its ability to innovate and the efficiency of its markets. Jyoti Banerjee checks out the league tables in competitiveness.
Coming 11th out of 131 competing countries does not sound too bad – probably a better performance than the collective achievement of the highly-paid elite that make up England’s football team. What is disappointing is the basis for the fall from second to eleventh place. According to the Global Competitiveness Report for 2007-08, four of the most problematic factors in doing business in the UK are tax rates, tax regulations, an inadequately educated workforce and inefficient government bureaucracy.
Just take a moment and read that list again. In every instance, the finger of blame points to one culprit, the government.
Now that’s disappointing.
It was only in February that this blog pointed to the deterioration in the UK’s tax environment, as we slipped from 7th to 13th spot in the WEF’s tax competitiveness league. Less than a year later, we are being told that tax has become one of the biggest problematic factors in doing business.
It must be said that government is mostly, but not solely, to blame when it comes to tax. Check out the recent row between government and business on capital gains tax. Chancellor Alastair Darling has had to retrench his plans to remove taper relief on the capital gains tax from the sale of shares in a business. It seems that the message carried by the CBI, the Institute of Directors, and the Federation of Small Businesses was a singular one: business does not want the change in tax. Yet every businessman I talk to complains bitterly about the complexity of regulation they face in their jobs day-to-day. So why would these complainers not back a scheme that simplified the capital gains tax structure to such an extent? Because it would hurt them in their pockets, it turns out. So a resounding yes to tax simplication, but not over my dead body if it hurts me in the slightest: that seems to be the uncompromising message from business to the Chancellor.
No wonder we will continue to have a deteriorating tax environment.
What must hurt Gordon Brown is the assessment made by WEF of Britain’s macro-economic stability, a key platform for Labour in winning the hearts of business – it seems Britain is now 46th in this particular table. The position would look even worse if proper account had been taken of the impact of the Northern Rock banana-skin on the measurement of the soundness of UK banks, where we ranked fourth overall.
Our poor macro-economic performance is driven by a very low national savings rate (96th in the world), worse-than-average government deficit performance, and inferior ratings on government debt.
What will further hurt our performance in the long-term are two significant areas of under-achievement that need to be addressed with all urgency: the lack of preparedness of Britain’s workforce for the rigours of life a competitive globalised world market for skilled workers, and the downhill slide Britain is facing in making the most of technology and innovation.
None of this might sound new to you but it has the monotonicity of a ringing bell that gets louder every time it tolls. Wake up, Britain. Wake up government. We are on the long slide to mediocrity.
Of course, we should not ignore the two areas where Britain leads the rest of the world: we are best when it comes to legal rights in financial markets, and we have the lowest numbers in malaria incidence.
And we are very good when it comes to (a lack of ) government coups - clearly, the WEF does not rate Brown's take-over from Blair as a coup...
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