According to Trading Places, a Deloitte report published today, the UK is ranked sixth amongst 25 world economies as the most competitive place in the world to do business, but this position is projected to slide to 12th if Government and business don’t take action now.

The Deloitte Competitiveness Index (DCI) is a new ranking based on key drivers of wealth creation – innovation, enterprise, investment and macroeconomic data. The report includes a survey of 300 UK business leaders who provide their perspective on the UK’s business environment today as well as predictions for the future.

Currently, the index ranks the UK among the top five countries when measured on macroeconomic stability and enterprise, however on skills, innovation and tax/regulation, the UK is significantly lower in the rankings. The index also provides future predictions assuming a continuation of trends and this is where the UK faces challenges, potentially dropping out of the top 10 by 2010. 

David Owen, Deloitte partner said: "Despite a strong performance when benchmarked against the world’s most competitive countries, the Deloitte Competitiveness Index’s underlying trends illustrate that the UK risks a fall in the rate of growth of GDP and deceleration of wealth creation. What needs to be recognised now is that business leaders and Government have tremendous power to force positive change to reverse the potential slide.

“The UK is at a critical point in its evolution as a centre for global business and its challenge is to turn accelerating globalisation into competitive advantage.  Addressing the challenge should be a shared agenda for business and Government. Business leaders will need to ensure that the opportunities of a global market are taken, whether it is through reshaping business processes or building capabilities to evaluate constantly their network operations globally. In the UK between one fifth and one third of all functions are located abroad but this position will need to be kept under constant review in order to tap the global market.

“For their parts Government must concentrate on further policy reforms to ensure they remain in line with the world’s best practices. Recent initiatives by the UK Government have gone someway to bolster business optimism and could lead to improvements in both the innovation, and skills rankings in the next five years. However, the perception among business leaders is that tax and regulation need to be addressed to sustain and build on the UK’s position. A greater focus on R&D expenditure and smarter, rather than more, regulation should be a priority.” 

Further report analysis shows that the US is at the top of the league table with a strong performance across all sectors with a particular strength as 3.2% of its GDP is invested in R&D. Nordic countries Sweden, Finland and Denmark followed closely behind with strength in innovation and investment, while Germany was placed 5th in the ranking owing to its strong innovation base, enterprise and investment environment.

In emerging countries, South Korea is the front runner ranked at 13, followed by India at 22 and China at 24. These countries are all expected to climb the ladder creating a tougher trading environment for continental Europe.

David Owen added, “The Deloitte Competitiveness Index shows the long term mechanisms by which a country becomes wealth creating and in spite of the current low ranking of China and India their economic prowess should not be underestimated. For instance, since the 1970s South Korea has created an environment in which innovation, skills and enterprise have fostered, and in ten years South Korea has moved from 22nd place to a forecasted 5th place by 2010.”

Key Findings:

• UK ranked 5th for macroeconomic stability, 4th for enterprise, 12th for innovation and 12th for investment.
• 29% of business leaders said they would never consider relocating headquarters.
• Business leaders say there have been big improvements in the last five years, especially in skills and innovation but they do not rank the UK highly for fairness of tax or effectiveness of regulation.
• The business leader survey ranked the UK highly for access to capital and macroeconomic stability while skills, market dynamics and innovation are also fairly strong. 

Deloitte Competitiveness Index

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The information contained in this press release is correct at the time of going to press.

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