As we enter the final straight before the election, much of the debate has focused on the differing prescriptions for reducing the national debt and cutting the costs of the public sector. It is clearly vital that government should have a relentless focus on its cost base and on generating efficiencies. However, that focus should not obscure the equally important task of restoring sustainable growth to our economy.
The recession has created a whole range of “zombie” enterprises — organisations that have survived the downturn but are limping along and finding it difficult to compete and grow. That has implications for the state of the public finances. Cost-reduction programmes, however aggressive, will not be sufficient to deal with the structural and cyclical debts acquired during the recession. It will also be crucial to create an environment in which our existing industries have the support to survive in a harsher world and in which new businesses can emerge.
In order to do this we need to understand how much our economy has changed. In a more globalised world some primary sectors such as mass-produced consumer goods are struggling to compete against foreign companies with similar resources and lower cost bases. Others are undermined by products and services from more innovative countries.
The UK economy does still have real strengths. For example, it has managed to increase the number of foreign direct investment (FDI) projects in the past three years. However, our research indicates that the UK’s share of the jobs created by all FDI projects in Western Europe has declined in the health, bio-pharma, environment and ICT sectors. These are vital high-tech areas, with potential for growth, where it is crucial that the UK retains its leading position.
Our capability analysis shows that we still have a strong base of invention and idea generation but our ability to exploit these in markets remains weaker.
A clearer framework is needed to leverage our industrial, enterprise and academic base to deliver stronger growth, supporting the implementation of new technologies more effectively. For example, we need to facilitate the reuse of aerospace and automotive technologies to the medical device and consumer markets to create new products.
This can be achieved by the creation of grids (networks) where knowledge and resources can flow in any direction. Companies could quickly locate their ideal partner and then share resources and expertise. This could range from informal contacts to outsourcing to joint ventures. Members of the grid could agree to give one another access to their know-how, helping them to make informed decisions, rapidly and with less risk. Accessing the right grid could open up virtually unlimited opportunities.
We now need to sharpen our focus on the national assets we have and capitalise on their inherent strengths, reinforcing their ability to compete on the world stage in a sustainable way. This will be essential if we are to improve our economic performance; pay off our debts; and ensure the UK is leading global economic growth rather than struggling to catch up.
• Colm Reilly is head of PA Consulting Group’s government practice
To read the full article in The Times, click here.