Performing on a Global Stage: How British Businesses can Compete with the World’s Best
The UK has always made a significant contribution to worldwide affairs, and business is one of the areas in which we consistently punch above our weight. However, the long-term fallout from the global recession has seen our economy fall behind many of our competitors in crucial areas like productivity. Our recently published Steps to Growth report canvassed 300 owner-managed businesses (OMBs) across Britain about their hopes, fears, and ambitions for the year ahead. As the backbone of the British economy, these companies have a crucial role to play in the continuing revitalisation of our economic environment. In our latest blog, we examine how British businesses see their competitors at home and abroad and examine how we can close the productivity gap with the rest of the world.
How the UK Economy Ranks Against the World’s Best
In the World Economic Forum’s Global Competitiveness Report 2015/16, the United Kingdom placed 10th – a drop of one place from the previous year. The UK actually improved its performance in almost all areas, but not enough to keep pace with its peers. The three top spots were taken by Switzerland, Singapore, and the United States, with European neighbours Germany and the Netherlands also placing ahead of the UK.
The UK ranks particularly highly in higher education, ability to attract overseas talent, IT infrastructure, and technological adoption. However, it falls down in terms of its macroeconomic environment, where it placed 108th overall, and other overarching factors like government deficit and public debt. Our report shows that British businesses are most concerned about macroeconomic factors too, with 50% of respondents identifying the UK’s regulatory and tax environment as their primary barrier to growth.
In our Steps to Growth report, our OMBs actually identified competitors within the UK as the biggest threat to their company – with 100% of respondents identifying it as the primary threat. The economic juggernaut that is the United States was second, with 54% of respondents identifying it as a threat, 14% higher than Europe at 41%. The perceived threat of US competition was most felt by the manufacturing (68%), construction (67%) and waste management (58%) sectors. Conversely, areas which British companies decidedly did not see as a threat were Africa (93% said not a threat), South America (93% said not a threat) and Oceania (85% said not a threat).
The Productivity Problem
One of the main factors affecting our ability to compete is productivity, where despite incremental increases we continue to lag behind most of our competitors. It’s only by addressing this productivity gap that we will truly be able to compete on a global scale.
At the moment, Britain has significantly lower levels of investment than many comparable global economies. This lack of investment may be linked to skills shortages, with companies reluctant to put profits into capital machinery that lacks the qualified staff to operate it. Our lower wage costs may also be a contributing factor, with companies avoiding investment in expensive machinery and instead relying on a surplus of affordable labour to increase output.
Closing the Skills Gap
In construction and waste management, the skills gap is seen as the biggest threat to growth, with 49% and 43% respectively citing it as a risk, compared to the overall average of 38%. In an exclusive interview for our report, Lord Digby Jones identifies training as a key area in which we lag behind the rest of the world, saying, “We have high employment in the UK but we also have a productivity issue because we don’t train our people. OMBs should be investing in training to improve productivity.”
So what can be done to address this? The answer lies in education. Progressive companies could look to partner with third level institutions to create educational programmes specifically designed to train new employees to address skills gaps. Another option would be to create training programmes for existing employees to provide the new skills they need as digital begins to impact on every industry and sector. At a government level, school career guidance programmes could be used to provide clearly defined paths for students towards areas that are in need of trained workers.
By adopting policies like this in Britain, we can produce the skilled workers that our businesses so desperately need, and solve the productivity puzzle into the bargain. In many respects, we’re ideally placed to stake a claim as one of the world’s top economies, and the quality products and innovative ideas of our owner-managed businesses already form a firm base to build a globally competitive business environment. However, it’s clear that in order to truly compete with the world’s best, British business needs to continue to invest - in people, as well as capital.
How do you think Britain can improve its competitiveness on the global stage? Let us know in the comments.
And read the full Steps to Growth report at https://aibgb.co.uk/steps-to-growth.