The United Kingdom has been a developed, fiercely independent and international trading economy that was at the forefront of the 19th-century Industrial Revolution. However, a lot has changed over the decades. Kavan Choksi, a prominent business and finance expert, mentions that Brexit, or the UK’s decision to exit the European Union (EU) is heavily weighing down on its economy at the moment, while growth accelerates in many other parts of the world. In this situation, it has become critical for the United Kingdom to raise productivity and effectively balance its public finances
Kavan Choksi marks how UK’s economy can become more efficient in the current situation
Economic growth in the United Kingdom has slowed down, and Brexit is partly to blame for it. The sharp depreciation of the pound that followed the referendum in June 2016 led to price rises, and had a major negative impact on household budgets. Companies are now also investing less than expected in the country, as they wait to gain a better understanding of the future relationship between the UK and the EU. On the brighter side, cheaper pound and high growth of the trading partners of the country have caused an increase in demand for UK products abroad, which partially offset lower consumption and investment in the UK. By consistently improving and increasing productivity, the United Kingdom can get back on its growth track.
Here are a few suggestions on how the UK could support productivity and improve its economic growth:
- Building more homes and easing planning restrictions: Housing is pretty costly in the United Kingdom. With more houses available in the country, they shall become more affordable and make it less costly for workers to move between regions to explore better employment opportunities. This would improve the living standard of people as well.
- Improve the quality of infrastructure: Transportation bottlenecks and other infrastructure issues often hold back development in areas with lower productivity. Improved connectivity can assist in supporting growth and cutting down regional inequalities.
- Reform the education system: The students of the UK rank low on tests of basic skills, while companies in the country report shortages of skilled workers, including those with technical education. Improved schooling would help young professionals to find a job and help meet the talent demand in the nation.
- Invest in research: Spending on research and development, both public and private, is relatively low in the UK. More investments can make local companies better able to compete internationally.
According to Kavan Choksi, ever since the global financial crisis, employment in the UK has been increasing steadily. However, the productivity growth or the increase in average output per worker has almost stalled. Owing to the record low unemployment and fewer EU workers coming to the United Kingdom, the future economic growth of the nation is likely to depend on increasing the amount that each employee can produce. Brexit is not going to resolve the problem of lackluster productivity the nation. The more difficult it becomes to carry out cross border trade and employ foreign workers, the more negative implications it would have for the economy. After all, international competition commonly encourages companies to accelerate their productivity and invest more, while immigration helps in hiring skilled and talented employees.