government's job to stop business ‘building on sand'

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date: Monday 11 August 2003

embargo: 00:01hrs Tuesday 12 August 2003

Attention: industrial, business and management correspondents

British business is stuck in a ‘low-road’ rut, under-investing and competing only by driving down costs and prices. It is government’s job to ignore the ‘red-tape whingers’ and act to lift the UK onto a ‘high-road’ economy, in which innovative businesses with well trained and highly skilled staff, provide quality products and services.

In its response to Professor Michael Porter’s ‘UK Competitiveness’ report, commissioned by the DTI, the TUC agrees with the prediction that UK business is building on sand by fighting to do things cheapest and risking constant under-cutting at home and abroad, instead of embracing the knowledge economy. The TUC also welcomes Prof Porter’s demolishing of the business lobby’s ‘red-tape’ whinging with the fact that the UK has the most unregulated economy among our competitors.

Yet ‘UK competitiveness’ fails to set out how UK business can get out of this precarious position, in particular, what the government can do. The TUC believe that due both to the weak standard of management Porter identified and businesses’ conservative record, fundamental change will not happen without government pressure. Further, the environment Porter believes business needs to operate in will not appear spontaneously, the government has to help create it.

Brendan Barber, TUC General Secretary, said:

'Business is building on sand and the tide is coming in. The UK cannot compete for much longer with a strategy of building cheap things cheaper. The government are going to have to get on with the job while business remains pre-occupied with whinging about imaginary ‘red-tape’.

'The UK needs a high quality business environment and the government can start building it now with a number of productivity-driven interventions. A knowledge economy will thrive with a well paid and highly skilled workforce, achieved through a higher minimum wage and a properly co-ordinated and used skills training system. But only effective informing and consulting generates the employee trust and empowerment vital to a high performance workplace.'

‘Shifting to the high road’ - summary:

  • ‘UK Competitiveness’ argues that the UK is not well placed to compete in the ‘knowledge economy’ unless companies form concentrations of businesses - ‘clusters’ - which put on pressure to raise quality and increase innovation. The TUC points out that some of the most successful clusters are found in high wage, high regulation Scandinavian economies.
  • Prof Porter identifies two main possible ‘drivers’ behind the UK’s competitive disadvantages - weaknesses in British management or the business environment.
  • The Porter Report demolishes arguments that British companies are being strangled by a 'red tape burden', noting that the UK has 'the lowest rate of product and labour market regulations in the OECD', an overall level of taxation that is 'slightly lower than in other advanced economies' and 'one of the highest levels of labour force utilisation in the OECD' (hours worked per employee, employment rate and labour force participation rate).
  • The weakest aspect of Prof Porter’s report is his consistent tendency to under-state the role of Government in remedying the defects he identifies.
  • One prescription Prof Porter does offer is to suggest the need for a productivity-driven regulatory system. The TUC suggests three areas where the Government has the capacity immediately to raise business standards:
  • Wages - the TUC calls on the Government to raise the national minimum wage to remove businesses’ 'low pay crutch'. Low labour costs make the ‘low-road’ strategies attractive to UK business and prevent local demand for quality goods as people can only afford to buy cheap.
  • Training - the TUC argue for co-ordinated action to raise the supply of ­and demand for skills.
  • Information and consultation - the TUC call on the Government to promote best practice in employee consultation and participation when implementing the EU Directive on Information and Consultation.

Notes to Editors:

A full copy of ‘Shifting to the high road’ is available at here.

Contacts:

Media enquiries: Ben Hurley 020 7467 1248 or 07626 317903 (pager) or email media@tuc.org.uk

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