New figures have suggested that efforts to rebalance the economy through an improved export drive could be meeting with deep-seated obstacles.
According to think-tank, IPPR a meagre 7 per cent of UK exports are heading towards the BRIC economies of Brazil, Russia, India and China.
The IPPR pointed out that the percentage of British exports to Belgium and Luxembourg is 2.9 per cent, which is nearly double the total that goes to China. Yet the overall GDP of Belgium and Luxembourg is a mere 10 per cent that of China.
In Germany, it’s a different story. German exporters sent goods and services worth £47 billion to China in 2010, an improvement of 44 per cent on the previous year. That figure is twice the value of their British counterparts.
One reason for this that German exports are made up of a greater proportion of goods; the UK concentrates more on selling services abroad.
The US also has a better record of exporting to China.
The IPPR report identified poor business investment in the UK, which occupies last place among the G7 nations for the percentage of GDP that is spent on investment.
There are other problems facing the UK’s export drive, too, the IPPR argued. The quality of the infrastructure lags behind that of many other developed economies.
Productivity is also weaker compared with the US, France and Germany. Blame lies in large part with the lack of skills among the UK workforce. Almost a third of British adults have poor or no qualifications; in Germany only 15 per cent adults are as badly educated, while in the US that proportion drops to 10 per cent.
Tony Dolphin, the IPPR’s associate director, put forward the case for very long-term planning: “Economic success means looking to what needs to be achieved over the next few decades not the next few years. The UK economy has serious structural challenges that require an active industrial policy to tackle them. Only then will the UK survive the Asian century’.
“For example, Britain needs a state investment bank, like they have in Germany and Scandinavian countries, or even a major state-led investment fund, like in France. Other policies that should be considered are an expansion of the export credit guarantee scheme, greater efforts to identify and provide companies with the skills that will be needed to compete and a change to enterprise zones policy to strategically focus on innovation.”
