From weak trade performance to low business investment, Britain’s shortcomings are its own doingby Simon Tilford / February 16, 2018 / Leave a comment
For Britain’s Eurosceptics, there are few problems that will not be solved by leaving the European Union.
Boris Johnson says that it is only “by taking control of our laws that UK entrepreneurs can innovate” and that Brexit is an opportunity “to build a truly global Britain.” Michael Gove, another leading Brexiter, demands that Britain must make a clean break with the EU or risk becoming an outdated “VHS economy.” They see Brexit as a liberation, a way of unshackling Britain’s economy from the dead hand of EU regulation and freeing British firms to compete internationally.
This is nothing more than escapism. Nearly all of Britain’s actual problems, from its weak trade performance, low investment, poor infrastructure, yawning regional disparities, struggling public services, housing and skills shortages, are home grown. All of these short-comings are surmountable if we are honest about the origins of them rather than searching for scapegoats. All will be aggravated by leaving the EU. How Britain responds to this will determine whether any good can yet come from Brexit.
There is no doubting Britain’s sluggish export performance, and in particular, UK firms’ poor record of tapping into big new emerging markets. But this is not down to the EU’s failure to sign trade agreements with these countries. After all, German firms export five times as much to China than British ones. It’s similar story in Latin America and Africa.
The reason for Britain’s poor trade performance almost certainly lies in the country’s low level of business investment; British firms invest a lot less than their counterparts elsewhere in Europe (or the United States). It is hard to sell things in other countries if companies do not spend enough on new products and services or the marketing and distribution needed to persuade customers to buy them.
Britain’s low business investment also helps explain its poor productivity levels and related skills deficit. The British government does a passable job of educating Britain’s young, although there are big regional variations and overall levels of literacy and numeracy are weak relative to comparable developed economies. But the really serious problem is weak vocational training, and the failure of firms to invest sufficiently in their employees’ skills.
Why is private sector investment so low in Britain? Eurosceptics, at least of the right-wing…