Why the UK is Turning Into An Old-Style Third World Economy

Why the UK is Turning Into An Old-Style Third World Economy

The OECD’s latest economic outlook has highlighted the fact that whilst ‘real GDP in the United Kingdom is still 3.1% below its value in the first quarter of 2008, but employment is back where it started’. At a breakfast meeting this morning the head of Europe’s leading employers’ group explains why this phenomenon is less a mystery than a deeply disturbing trend. The Federation of European Employers reports ....

Commenting at a business leaders’ breakfast briefing today the Secretary-General of the Federation of European Employers (FedEE), Robin Chater, went some way to explain a phenomenon which has been termed “the UK Paradox”. The paradox arises because contrary to expected trends employment levels in the UK have been rising in recent years, even though GDP has been falling.

According to Robin Chater “If we take a look at UK capital replacement figures in national accounts statistics we can see that it has fallen more than any European country since 2005. The UK is turning into an old-style third world country with low pay growth for most workers below managerial level, widening pay differentials and poor levels of capital investment. This has been partly encouraged by the influx of workers from eastern Europe since 2004 - who have been willing to perform many functions at low wage rates that would have otherwise been automated.

It s ironic that although the city of London financial markets represent Europe's largest foreign direct investor in the rest of the world the city largely neglects its home market. This is a second paradox with massive amounts of money flowing in and out of the exchanges in London, whilst all around it is the waste land of the British economy - starving for capital investments. Of course, it s not all the fault of the city - as much of the blame must be placed on companies operating in the UK for taking a short-term view and continuing to use machinery/equipment/systems that should have been replaced long ago.

As Henry Ford once said "If you need a machine and don't buy it, then you will ultimately find that you have paid for it and don't have it."

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What is FedEE?

The Federation of European Employers (FedEE) is the leading organization for multinational companies operating in Europe. It was founded in 1989 with assistance from the European Commission and has its head office in London, UK. The Federation is a direct member organization currently chaired by Ford Europe.

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