Prospects for improving the UK’s rate of growth and productivity

During our recent Chair dinner, serious concerns were raised about the country’s current prospects for economic growth and productivity.

Issues such as the lack of diversity in leadership, declining trust in institutions, the impact of Brexit, the cost of capital, and ongoing shortages of labour all require additional attention from government. Additionally, the inadequate levels of investment in critical infrastructure and the exodus of talent from the civil service pose significant challenges.

It is evident that the country requires a fresh wave of proactive approaches and ideas to overcome these obstacles to ensure a brighter future for the UK.

Lack of diversity and inclusion in leadership:

Despite considerable progress, achieving true diversity in the UK’s leadership ranks remains a significant challenge. The lockdown period provided a glimpse of hope as finding and attracting diverse talent seemed more attainable, resulting from a need for different leadership qualities during the pandemic. Efforts to address the issues were further supported by virtual interview processes, which appeared to reduce levels of unconscious bias.

However, returning to traditional work environments has introduced new obstacles, highlighting the risks associated with a lack of diversity, such as groupthink and limited perspectives. This underscores the urgency for further change.

Declining trust in institutions:

Institutional trust has seen a decline, with recent news about organisations like the Confederation of British Industry (CBI) serving as a reminder about the importance of ethics and integrity. The public’s trust in the government, the media, and big business is waning. Rebuilding public trust and maintaining the credibility of these institutions requires transparency, accountability, and ethical conduct. However, despite the prevailing distrust, there continues to be strong support for the CBI and its role in bridging the gap between businesses, government, and society, thereby promoting economic growth and prosperity.

Government’s lack of direction:

Perceptions of a lack of clear direction from the government have created uncertainty and undermined confidence in the business community. Dissatisfaction with the current political landscape stems from criticisms of decision-making, policies, and actions.

One specific example is the government’s proposed decision regarding the implementation of price caps on gas and electricity. Supporters argue that price caps can protect the increasingly vulnerable population, while critics challenge that government intervention could hinder market dynamics, suppress competition, and lead to unintended consequences.

These sentiments reflect a growing demand for significant changes and improved governance to inspire confidence and provide a clear path forward.

Lack of investment in infrastructure:

Major investment in infrastructure is urgently needed, but a lack of political will hampers progress. Initiatives like “Levelling Up” and development require careful evaluation and inclusive decision-making processes to address regional disparities and foster balanced development. On top of this, there needs to be razor-sharp prioritisation from government and businesses around the growing number of projects being considered. While some projects can be linked to the Levelling Up initiative, it won’t be the case for the majority. Without this focus, along with the requisite expertise and access to sufficient capital, the UK will struggle to deliver these projects.

The exodus of talent from the civil service:

The civil service is experiencing a talent exodus due to dissatisfaction with the government’s direction and chronic underinvestment. Retention of skilled and experienced professionals is vital for the country’s progress. Addressing their concerns and making the civil service a more attractive and rewarding workplace is crucial to preserve valuable expertise.

Addressing economic challenges:

Inflation and debt challenges have added complexities to the economic landscape. Changes in consumer behaviour following Brexit have also contributed to uncertainties. Navigating these challenges demands adaptive strategies and nimble decision-making to mitigate potential economic downturns.

Optimism around mortgage rates:

There is a more positive outlook regarding the mortgage market, suggesting that the number of defaults will be significantly lower than anticipated. This could promote financial stability and a healthier economy. Factors such as a more cautious approach to lending, the prevalence of fixed-term mortgages protecting customers, and the sentiment that individuals will prioritise meeting their mortgage obligations by sacrificing luxury elements and non-essentials contribute to this view. However, despite this more uplifting view, the situation raises questions about the role of government intervention and its potential impact on mortgage rates and the overall economy.

Conclusions

Despite the obstacles, the room had a very positive atmosphere, and most Chairs expressed optimism for the future of their businesses. They believe that inflation will be tamed over the coming months, Brexit challenges are being resolved – indicating a more stable, and the cost of capital is expected to decrease over time, accompanied by a loosening of debt markets. Consumer spending remains relatively strong due to pandemic savings, high employment levels, and encouraging signs that the cost-of-living crisis has reached its peaked. The consensus was that whilst economic cycles are inevitable, the current challenges will soon diminish, paving the way for brighter times in 2024.

By proactively focusing on ways to address our short-term challenges, the UK has a greater chance of remaining competitive on the global stage, as well as to build a more cohesive society and produce some productivity gains that should underpin the next period of economic growth.

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