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Measuring UK Competitiveness


List of indicators used to measure the competitiveness of the UK.

     Business Environment

Macroeconomic Environment

·  Macroeconomic volatility (growth, inflation, short-term interest rates, exchange rates)


·  Openness to trade and foreign investment

·  Prices

Labour Market

·  Unemployment

·  Diversity of employment opportunities

·  Industrial action

·  Labour market regulation

Business Perceptions of Institutions

·  Business perceptions of the institutional and political environment

Quality of Life

·  Sustainable Development Indicators


Human Capital

·  Adult literacy and numeracy

·  National Learning Targets

Physical Capital

·  Business investment per worker

·  Government investment per head


·  Venture capital

·  Second tier markets

·  Stock market size and turnover

Information and Communications Technology (ICT)

·  Business uptake and use of ICT

·  ICT understanding in companies

·  E-commerce

Science and Technology

·  Publications and citations of UK research in academic journals

·  Government spend on R&D per worker

·  Business spend on R&D per worker

Innovation Process

Technology Commercialisation

·  Business spend on innovation including R&D

·  UK's patenting performance

·  Proportion of firms who innovate

·  Share of sales from new or improved products

Receptiveness to Foreign Ideas

·  Internationalisation of R&D

·  Technological alliances between firms

Knowledge Transfer

·  Sources of information for innovation

·  Joint publishing by universities and industry

·  University spin-outs


·  Entry and exit rates

·  Fast growing firms

·  Attitudes to entrepreneurship



·  GDP per head


·  Output per worker and per hour


·  Employment rate

Specialisation in Trade

·  Trade balances in knowledge based industries

Composition of the Economy

·  Share of output in knowledge based industries

 These measures can be compared against what the UK government is attempting to do to improve the competitiveness of the UK.


The UK Government’s Commitment to Improving Competitiveness

Adapted from www.dti.gov.uk/comp/competitive/summary.htm

The government’s commitment

The Government’s White Paper sets out the role it and business need to play in improving the UK’s competitiveness. Our aim is to close the performance gap between the UK and other major trading nations. This is a job for business but Government must create the right environment for business success by providing an economic framework which is stable and enterprising. The Government will put in place policies and programmes to help businesses innovate and succeed as we all face the challenge of the knowledge driven economy.


The challenge

The global market — its demands

Nations across the world are becoming progressively more sophisticated and well educated. All markets increasingly demand innovative and higher quality products and services.

The pressure for change

  • Competition from low cost economies — using new technologies, skilled people and mobile capital.
  • Innovative products, processes and services — spreading rapidly across the globe.
  • Electronic commerce — radically changing the way business meets customers' demands.
  • Science and knowledgeunderpinning the new technologies.


How we will meet the challenge

In the global marketplace, knowledge, skills and creativity are needed above all to give the UK a competitive edge. These are the distinctive assets of a knowledge driven economy. They are essential to creating high-value products and services and to improving business processes. They are as vital in traditional engineering industries and in services as in high-technology businesses.


The role of business

  • Businesses need to identify, capture and market the knowledge base that drives all products and services.
  • They have to turn into commercial success the scientific and technological knowledge in our universities and research organisations.
  • Would-be entrepreneurs need to acquire and adopt a greater understanding of risk and business management skills.
  • Companies need to form collaborative partnerships with, amongst others, suppliers, customers, schools and universities to build networks and clusters of excellence to win competitive advantage.
  • Business must encourage and support all their employees continually to develop their skills and qualifications.


The role of government

Government’s role is to:

  • invest in capabilities to promote enterprise and stimulate innovation
  • catalyse collaboration to help business win competitive advantage
  • promote competition by opening and modernising markets.

Capabilities: Government cannot create wealth — only business can do that. But the Government must invest in British capabilities such as science, skills, innovative finance and digital technologies.

Government will:

  • put an extra £1.4 billion, with the Wellcome Trust, into the science and engineering base
  • increase DTI’s Innovation Budget over three years by more than 20 per cent
  • reward universities for strategies and activities to enhance interaction with business
  • help one million small businesses become proficient in the technologies they need to compete in the digital marketplace
  • publish proposals to meet the skills needs of the information and communications technology sector.

In addition, to create a new enterprise culture the Government will:

  • encourage the development of entrepreneurship skills, especially amongst school pupils, students and university researchers
  • create a £150 million Enterprise Fund to support SMEs with growth potential
  • deliver a new Business Link service providing advice to 10,000 innovative start-ups with growth potential each year
  • review the insolvency laws to give businesses in difficulties a better chance of turning around and to remove the stigma of failure.

Catalysing collaboration: Successful businesses are hungry to learn from competitors. They thrive on a mixture of aggressive competition and intense collaboration as in Silicon Valley in the US. In the knowledge driven economy, it is more important than ever that they collaborate with other businesses to improve, develop and market products through benchmarking and best practice.

However, many businesses do not have the time and resources to collaborate effectively. Government can help. DTI will:

  • back ten new sectoral initiatives building on the successful programme to improve performance in the automotive components industry
  • back with substantial funding the CBI Campaign, Fit for the Future, to encourage businesses to adopt best practice
  • support Regional Development Agencies in promoting regional competitiveness activities
  • develop the environment which encourages the creation and growth of business clusters.

Promoting competition: a dynamic economy needs flexible, open markets. The Government will:

  • crack down on unfair and anti-competitive behaviour
  • consult on the case for reform of merger policy
  • step up the pressure for economic reform in Europe
  • press for the removal of trade barriers internationally
  • make the UK a global hub for electronic commerce
  • reform telecommunications legislation
  • ensure intellectual property rights keep pace with the knowledge driven economy.

Innovation within government

Government needs to learn and innovate as much as the private sector and it must create new mechanisms for sharing ideas and best practice. Just as the UK needs more entrepreneurs in business, it needs a new generation of innovation in the public sector.

Actions to back this include:

  • setting up Enterprise and Knowledge Management Units in the DTI
  • conducting more government business electronically
  • creating a Competitiveness Index to track the UK’s progress towards reducing the performance gap
  • establishing a Competitiveness Council to advise the Secretary of State for Trade and Industry.

Government and business — working together for a successful future

The Government has outlined its commitment to put the future, particularly a knowledge driven future, on the UK’s side. Its policies have been shaped by working with and listening to the views of the business community. Government is committed to playing its part in making the UK a world-class place to do business in the next millennium.

We need to take up the challenge of the future. Only business can deliver prosperity and jobs. Government must know when to act, and when to keep out of the way. The Secretary of State has said that if business needs to draw his attention to any actions in central government that are holding back enterprise, it should contact him by writing to:

Secretary of State for Trade and Industry

Department of Trade and Industry

1-19 Victoria Street

London SW1H 0ET



E-mail Steve Margetts