The refusal of British business to accept any responsibility for the state of the economy is something I’ve ranted about before over at my place, but it’s an issue that continues to bug me.
The British business community complains, pretty much constantly, that the tax-and-regulation-happy policies instituted during nine years of Labour government are risking our national competitiveness. That jobs, capital and rich people alike are going to start flooding out of the country in a nigh apocalyptic panic because Gordon Brown wants to spend more money on spurious stuff like schools and hospitals. That if the government doesn’t buck its ideas up sharpish, it won’t be long before the population of Bradford will be working in call centres and attending training sessions involving Bollywood movies, while the population of Mumbai and Bangalore panic about outsourcing.
Think I’m exaggerating? Okay. How about this report from Civitas, which says that regulations could be costing us Ã‚Â£30bn a year, and that costs rose by a third between 2004 and 2005. Red tape is strangling the UK economy, we are told.
Or this story in which George Osborne, the shadow Chancellor, complains that “the sheer complexity of the tax system is now having a real impact on Britain’s competitiveness.” Not, you note, that the party has made any concrete proposals for tax reform.
Or there’s this report from Sheffield Hallam University’s Management School, which complains that “Britain’s burgeoning public sector bureaucracy coupled with large regional economic disparities have caused it to plunge down the global economic competitiveness league since Labour came to power in 1997″. This isn’t an entirely unreasonable comment, until you remember that if one party is most responsible for “regional economic disparities”, it certainly isn’t Labour. (Remind me, whose economic policies gutted the industrial north in the 1980s without making any serious moves to create alternative jobs?)
…and that’s just what I found in two minutes on google.
But this morning I came across something that cheered me somewhat, courtesy of the excellent New Economist blog. It’s the World Economic Forum’s Global Competitiveness Report 2006-07, which ranks the countries of the industrialized world based on their ability to compete in the global economy. Its commentary on the UK is… enlightening:
The United Kingdom excels in market efficiency indicators, with the most efficient financial markets in the world. The flexibility of the UK labor market and its low levels of unemployment stand in sharp contrast to that of Germany, where the business community is saddled with cumbersome labor regulations. But Germany does somewhat better than the United Kingdom in innovation indicators and the sophistication of its business community, which are among the best in the world.
…or, in other words, get over it, and start thinking about how to improve your own performance instead of just bitch-slapping the government over theirs.
The biggest threat to Britain’s competitiveness, as far as I recall, is our low productivity (e.g. the amount of value that can be generated during an average hour’s work). And one of the biggest drivers of productivity is business investment – in training, equipment, research and development and the like.
And on this, Britain falls down. According to this briefing from the Economic and Social Research Council (ESRC)
Investment by business was lower in the UK than any other G7 nation across the period 1990 – 2002. However forecasts for future investment based on the latest trends are more positive. Expenditure on research and development (R&D) is lower in the UK than many of its competitors.
This would be less worrying, if British management had some magical touch that was generating a flow of fantastically profitable ideas and was keeping us ahead of the curve. Unfortunately, large chunks of British management are, in fact, shit. Take this rather amusing survey which finds that “UK is infested with bad managers”.
Or, if you’d prefer something a little more fact-based, try the ESRC again. It claims that “US firms are on average the best managed, with the Germans second, the French third and the UK worst”, and that “the differences in management practices between the UK and the United States can explain 10-15% of the productivity gap between the two countries.”
I can’t help but be reminded of the publishing company I once worked for which, after one team had worked 12 hour days for three months on Ã‚Â£15k a year to get a project finished, called a meeting to congratulate them on their success and present them with gifts. A bonus? I wondered. Some nice wine? Nope. Mugs and mousemats with the slogan “I [heart] the company.” The executive whose brainchild this was is now, rather regrettably, a Tory MP, and no doubt spends plenty of time ranting about the burdens of red tape himself.
Business is right that Britain needs to be more competitive. But that won’t just mean tinkering with the tax regime, or improving the education system: it means accepting that sometimes you have to have lower profits today to invest in the hope of bigger profits tomorrow. And it means rewarding good performance instead of expecting it as a right.
Next time the business lobby starts whining on about how Labour has put our economic strength at risk, they might also want to think about how best to clean their own house.