A decade of stagnant living standards, weak productivity and low investment combined with a coming decade of major change - driven by Covid-19, Brexit and Net Zero - mean that it is crucial for the UK to renew its economic strategy. The received wisdom is that the UK is a narrowly specialised economy; that it is only competitive in financial services and ancillary business services; and that this specialisation has come at the expense of our manufacturing industry and the high-quality jobs it provides. By ending our reliance on banking and reindustrialising, so the thinking goes, we can revitalise our economy. In this report, we argue that these are poor premises on which to base a new economic strategy. Policy makers should instead pay attention to the reality of the UK's existing and potential economic strengths and how slowly they typically evolve. Building on these, and dealing with the trade-offs they present, will be key to a successful new economic strategy.
This report considers the UK's present comparative advantages in exports and innovation, analysing how long they have existed and where they come from. We consider whether these strengths are indeed especially narrow or unusual compared to other countries, and also show which other countries share our patterns of specialism. We assess the prospects for some of our current key specialisms, and we analyse what challenges the UK's comparative advantages pose for an economic strategy that seeks to provide good quality employment and to reduce inequality.
Josh De Lyon, Ralf Martin, Juliana Oliveira-Cunha, Arjun Shah, Krishan Shah, Gregory Thwaites and Anna Valero
28 April 2022
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This work is published under POID and is part of the CEP's Trade programmeGrowth programme.
This publication comes under the following CEP theme: UK productivity and policy