Beyond the headlines about inflation, high interest rates and a cost-of-living crisis, the UK economy is also suffering some of the most serious systemic challenges of the past century. Four challenges in particular stand out. First, the UK economy has persistently low economic growth. Office for National Statistics (ONS) data shows that it grew by an average of 2.7% per year before the global financial crisis in 2008/09, compared with an average of 1.1% per year since the crisis. Second, the economy offers a poor platform for future growth. Analysis from the National Institute of Economic and Social research (NIESR) shows that in the three decades since the Second World War, the average UK productivity growth rate was around 3.6%, before slowing to 2.1% in the following three decades. From the start of the financial crisis in 2007 to 2019, productivity has grown by an average of just 0.2%. If productivity had continued to grow at 2% per year, it would have meant an extra £5,000 per worker per year on average.
Beyond this, the UK also doesn’t necessarily have the workforce to fill those jobs. ICAEW Business Confidence Monitor data shows that access to the right skills persists as one of the biggest challenges for businesses up and down the country; the UK workforce is shrinking, with nearly 500,000 more people economically inactive due to long-term ill health than in early 2020; and the population is ageing. In the next 25 years, the number of people over 85 will double to 2.6 million.
Third, even with what economic growth there is, fewer people are likely to see the fruits of it compared with the UK’s peer rich economies. The UK’s levels of inequality are higher than any other major European country barring Italy.
There is no question that the UK economy finds itself at an inflection point. It shares some challenges with the world’s rich economies, while others – especially, but not only, Brexit – it must navigate alone.
Looking for solutions
All of these problems are well discussed and documented, and there are certainly no quick fixes or simple, ready-made solutions. But that doesn’t mean that nothing can be done. As the new content series explores, there are three challenges that UK business has a core role in helping to tackle and so, by definition, do chartered accountants, who provide day-to-day support to more than three million businesses up and down the country.
Our first theme, launching on 27 September, will look at why poor productivity is holding the UK back, and what can be done about it according to the country’s leading experts. And through a short film we will introduce you to companies and chartered accountants that provide lessons and ideas for what could be replicated at a national scale.
Our second theme looks at challenges posed by the UK workforce, as well as ideas for providing people with the skills and experience that businesses need and, in turn, creating meaningful, well-paid jobs that improve people’s lives. The third theme investigates how the UK must engage better with international markets, both in exporting to them but also in attracting the right goods, services, technology, talent and capital into the country to build a resilient economy for the future.
Businesses and the local communities in which they operate are finding answers to these problems on a micro scale. The next step is to find policy solutions across the long term. Although policymakers hold the responsibility for tackling this, it’s clear that UK business and chartered accountants have a leading role to play in feeding into those solutions and then in implementing them. By extension, they have a key role to play in addressing these critical economic problems that are holding back growth and prosperity in the UK.
We’d love to hear any questions, comments or suggestions you have about the series as we get underway.
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