World Economy

UK Must Boost Investment, Skills for Growth

UK Must Boost Investment, Skills for GrowthUK Must Boost Investment, Skills for Growth

A report by the ICAEW “downgrades the growth forecast for the UK from 2.4% to 2.3% this year and forecasts GDP per worker will grow just 0.8% in 2015.”

The Institute of Chartered Accountants in England and Wales said Monday that business Investment growth is also expected to slow in 2015 to 4% (from 6.8% last year)–this has been affected by uncertainty in lots of areas:  over the UK’s place in Europe, devolution, international risks such as the Eurozone, a potential Greek exit, and China’s cooling economy.

“We believe that government needs to act to send a strong signal to restore business confidence and ultimately growth. So much in the economy depends on business confidence. So in our pre-budget letter this week, we called for the rate of the annual investment allowance to be fixed at £500,000 ($775,600) to provide stability and consistency to firms that like to plan and invest for the long term, and kick-start the kind of investment we need.”

 Productivity, Skills

The UK is one of the least productive countries in the G7, and it’s no surprise that this government is looking to address the UK’s poor productivity in the budget next month. It has dropped dramatically since the financial crisis and not yet recovered.

Companies are finding that it is harder and harder to get the skilled staff they need to grow. Over the past year a lack of skills has become a growing concern for businesses, particularly in industries such as construction, where it has started to constrain growth. The workforce of tomorrow desperately needs better quality careers advice that can open their eyes to the possibilities on offer.

“We also need to spread growth across the UK. The difference in entrepreneurial activity across the regions is stark. Per 10,000 adults, London has about 1,400 businesses, double the 700 seen in the North East of England. Tax incentives, could be a key way of addressing this. If the UK’s regions could compete on corporation tax and income tax, they would be able to retain and draw in top talent.

 Other Findings

“We are expecting further improvements in the unemployment rate. ICAEW forecasts an average of 5.1% in 2015, the lowest annual rate since 2005 when it stood at 4.8%.

Real (inflation-adjusted) employee earnings are expected to rise by 1.5% this year–this is unchanged from our previous estimate. Employees continue to benefit from low inflation and low interest rates, which we don’t expect to rise until early 2016.