Closing The UK Competitiveness Gap

Abstract

This paper is developed from the presentation given by Walter Eltis at the National Institute's seminar 'Industrial Productivity and Competitiveness' held in London on 23 May 1995. It sets out the approach underlying the UK Government's 1994 and 1995 White Papers on competitiveness and begins by reviewing the debate on the meaning of national competitiveness. The White Papers define competitiveness as the ability to raise living standards and argue that, contrary to the views of some leading economists, competitiveness is a useful guide to policy because of the emphasis on national benchmarking. It then explains that the analytical basis of the Government's approach—which identifies ten key influences on competitiveness—lies in the theoretical and empirical analysis of economic growth (including 'new' growth theory) and on detailed studies of the sources of productivity differences across countries. Finally, it considers the role of privatisation, inward investment, the growth of small firms and labour market policies in improving UK performance. The paper concludes that, although three quarters of the productivity gap with French and Germany industry appears to have been closed since 1979, productivity in both manufacturing and services still lags behind those in the leading West European countries.