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Mr Cameron - the real problem of UK Competitiveness is NOT the EU

The UK Prime Minister, David Cameron spoke last week about a 'crisis of European Competitiveness'  http://www.number10.gov.uk/news/david-cameron-eu-speech/ and he cited issues such as the rights of workers, including the Working Time Directive, as being a source of some of the problems. (More on the Working Time Directive here: https://www.gov.uk/maximum-weekly-working-hours/weekly-maximum-working-hours-and-opting-out).

The evidence on this is mixed and it could be argued that the crisis in competitiveness is the fault of the UK itself and its own economic failures rather than anything 'European'.

Economic students will know that economic growth is largely dependent on a country's improvements in 'productive capacity' in terms of investment in technology, factories, infrastructure and people.  An economy needs to spend money on the future in order to ensure that it can increase production and remain competitive compared to its neighbours.  To what extent has the UK done this?

Labour productivity

The UK Office for National Statistics has looked at a range of data and the productivity figures are very interesting. http://www.ons.gov.uk/ons/rel/icp/international-comparisons-of-productivity/2011---first-estimates/stb-icp-sep2012.html

If you measure the amount of GDP per each hour worked by each worker in the economy, Germany is around 21% higher and France is around 23% higher.  (Gross Domestic Product is the total output of the economy in a year.)

If the UK were as productive as them then UK workers could work four days a week instead of five and still produce the same amount of output!

Why this is the case could be due to any number of reasons: lack of investment, poor UK management, inefficient and lazy UK workers, lack of training, a less educated workforce, poor use of technology, etc.  However, what is less likely to be the cause for this differential is European legislation because surely that would equally affect France and Germany?

Granted, there is a small case to be made when comparisons are made between Europe and the USA which has higher levels of productivity than all three countries mentioned here, but this could be due to a variety of factors including the economies of scale of the US being such a massive market.

Investment

Economists refer to Business Investment in factories and infrastructure as Gross Fixed Capital Formation.  On this basis the UK spends around 14% of GDP, Germany 18% and France 20% on Investment.  http://data.worldbank.org/indicator/NE.GDI.FTOT.ZS

This has tended to be the case for a number of years, therefore every year our competitors are improving their productive capacity to a greater extent than the UK.

Conclusion

The UK has a competiveness problem but David Cameron's focus on elements such as the Working Time Directive and other similar points seem to be misguided - the argument for reducing the rights of workers is complicated, both economically and politically, moreover, they don't appear to be the main problem.

Before the UK looks to 'Europe' as the cause of the competitiveness issue we could do with learning some lessons from some of our continental cousins and then sort out our own shortcomings first.

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