United Kingdom OECD Economic survey addressing Brexit and weak productivity

1. 2017 OECD ECONOMIC SURVEY
OF THE UNITED KINGDOM
Addressing Brexit and weak productivity
October 17th 2017, London
http://www.oecd.org/eco/surveys/economic-survey-united-kingdom.htm
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2. GDP growth has slowed
1
Source: OECD Economic Outlook: Statistics and Projections Database.

3. Valuations of UK-oriented firms are lower
2
Source: Thomson Reuters Datastream.

4. Net migration has been falling since mid-2016
3
Source: Office for National Statistics.

5. 4
Labour productivity is at a standstill
Note: PPP: purchasing power parities.
Source: OECD Productivity Statistics Database.

6. Unemployment rate is at a 42-year low
5
Source: OECD Economic Outlook: Statistics and Projections Database.

7. 6
Job creation has become more diversified
Source: Office for National Statistics.

8. 7
Higher inflation has reduced real incomes
Source: Office for National Statistics.

9. 8
Households smooth their consumption
Source: Office for National Statistics and Bank of England.

10. Sterling’s fall may not restore competitiveness
9
Note: Export performance is the ratio of export volumes to export markets for total goods and services.
Source: OECD Economic Outlook: Statistics and Projections Database.

11. 10
Monetary stimulus has increased fiscal space
Note: The Asset Purchase Facility (APF) was set up for the Bank of England (BoE) to carry out quantitative easing.
Source: House of Commons Library.

12. 11
Average maturity of public debt is high
Source: OECD Sovereign Borrowing Outlook 2017.

13. 12
Taxes paid vary by job type
Note: NICs: National Insurance contributions.
Source: Office for Budget Responsibility.

14. 13
 Maintain the closest possible economic relationship with the
European Union after Brexit.
 Identify productivity-enhancing fiscal initiatives on investment
that could be implemented swiftly, should growth falter.
 Perform a tax and spending review to allow for additional fiscal
initiatives, including:
 Raise National Insurance contributions for the self-employed;
 Index the state pension on average earnings only.
 Introduce debt-to-income ratios for borrowers depending on
exposure to shocks to safeguard financial stability.
Key macroeconomic recommendations

15. 14
Reducing Regional Productivity Gaps

16. North-South divide in regional productivity
15Source: Office for National Statistics.
Gross value added per hour

17. Productivity of the average city is low
16Source: OECD Regional Statistics Database.

18. 17
London’s productivity is high across sectors
Source: Office for National Statistics.

19. High infrastructure spending prevails in London,
supported by Transport for London
18
Source: HM Treasury.

20. 19
Lagging regions rely more on EU funds
Source: Sheffield Political Economy Research Unit and Office for National Statistics.

21. Skills are lower in less productive regions
20Source: OECD Regional Statistics Database and Office for National Statistics.

22. Decentralisation is comparatively low
21
Source: OECD Regional Statistics Database.

23. 22
 Use the industrial strategy to develop integrated policy packages
based on current and emerging regional strengths.
 Invest in improving inter- and intra-city transport links to foster
agglomeration effects.
 Continue decentralisation by reaching deals with all city-regions
and grant local authorities more revenues from local taxes.
 Continue to increase direct and indirect support for private and
public R&D, and business-university collaborations.
 Adapt technical education to local business needs.
 Raise training and other incentives to reduce teacher shortages
in disadvantaged areas and/or regions.
Key recommendations on regional productivity

24. 23
Raising Low-Skilled Productivity and Job Quality

25. 24
Many adults have only basic skills
Source: OECD (2016), "Building Skills for All: A Review of England", OECD Skills Studies.

26. 25
Similar shares of low-skilled youth and elderly
Source: OECD (2016), "Building Skills for All: A Review of England", OECD Skills Studies.

27. 26
Investing in early childhood education is key
Source: OECD (2017), Education at a Glance 2017: OECD Indicators.

28. 27
Skills are low at all education levels
Source: Calculations based on the PIAAC database.

29. 28
Many students exit education relatively early
Source: OECD (2016), Education at a Glance 2017: OECD Indicators.

30. 29
Participation in vocational education is low
Source: OECD (2014), "Skills Beyond School: Synthesis Report", OECD Reviews of Vocational Education and Training.

31. 30
Mainly low skilled are on zero-hours contracts
Note: Zero-hours contracts refer to labour contracts which do not guarantee any hours in a given week.
Source: Office for National Statistics.

32. 31
Minimum wage is being raised to a high level
Source: Eurostat.

33. 32
Self-employment could be used to bypass
minimum wage regulations
Source: Office for National Statistics and Eurostat.

34. 33
 Prioritise funding to training and skills development of
childcare staff.
 Use existing flexibility in reaching the National Living Wage
2020 target in case of negative economic shocks
 Grant workers on zero-hour contracts enhanced job security
rights after three months.
 Introduce tighter criteria to restrict self-employment to truly
independent entrepreneurs.
 Introduce individually targeted programmes to improve
lifelong learning opportunities.
 Increase financing and continue to promote the effectiveness
of active labour market policies.
Key recommendations on low-skilled
productivity and job quality

35. For more information
Disclaimers:
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of
the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries
and to the name of any territory, city or area.
34
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http://www.oecd.org/eco/surveys/economic-survey-united-kingdom.htm