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Presentation of the OECD Economic Survey of the United Kingdom 2015

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United-kingdom-unleashing-productivity-oecd-main-findings-presentation

  1. 1. www.oecd.org/eco/surveys/economic-survey-united-kingdom.htm OECD OECD Economics OECD ECONOMIC SURVEYS: UNITED KINGDOM 2015 Unleashing productivity London, 24 February 2015
  2. 2. Growth is strong, the fastest in the G7 in 2014 2 Source : OECD (2015), OECD Economic Outlook: Statistics and Projections (database), February. 2.6 1.8 1.7 0.0 0.5 1.0 1.5 2.0 2.5 3.0 United Kingdom OECD G7 Real GDP growth Per cent, 2014 United Kingdom
  3. 3. But labour productivity is subdued, holding back living standards 3 1. Latest data point shown for labour productivity and real wages is an average of the first three quarters of 2014. Labour productivity is defined as output per worker (i.e. real gross value added (GVA) divided by total employment). Source : OECD (2015), OECD Economic Outlook: Statistics and Projections (database), February and ONS (2014), "Labour Productivity, Q3 2014", Office for National Statistics, December. 30 40 50 60 70 80 90 100 110 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 Labour productivity, wages and GDP per capita Index 2007 = 1001 Labour productivity Real wages Real GDP per capita
  4. 4. Main Findings o The sustainability of economic expansion and further progress in living standards rest on boosting productivity o Greater private infrastructure spending is needed to ease capacity constraints o Business lending remains tight o Housing supply has not risen to meet demand resulting in price increases 4
  5. 5. Key Recommendations o Implement further structural reforms to revive labour productivity o Pursue fiscal consolidation and ensure efforts are fair o Expand the National Infrastructure Plan and leverage public money with private investment o Strengthen competition among lenders to boost lending o Review land planning regulations to enhance housing supply 5
  6. 6. Reviving labour productivity
  7. 7. Well-being is comparatively high 7 http://dx.doi.org/10.1787/888933188968 Source : OECD (2014), OECD Better Life Index , www.oecdbetterlifeindex.org. Better Life Index, 2014 Indicator range from 0 (worst) to 10 (best) 0 1 2 3 4 5 6 7 8 9 10 Income and wealth Jobs and earnings Housing Work and life balance Health status Education and skillsSocial connections Civic engagement and governance Environmental quality Personal security Subjective well-being United Kingdom G7 (excluding UK) Reviving labour productivity
  8. 8. Growth is remarkably jobs-rich 8 http://dx.doi.org/10.1787/888933189049 1. Total employment also comprises unpaid family workers and those on government-supported training and employment programmes. Data for Q4 2014 refer to the period between September and November 2014. Source : ONS (2015), "Labour Market Statistics, January 2015", Office for National Statistics. -1 250 -1 000 -750 -500 -250 0 250 500 750 1 000 1 250 1 500 1 750 2008 2009 2010 2011 2012 2013 2014 Contributions to the change in total employment since Q1 2008 Thousand1 Full-time employees Part-time employees Full-time self-employed Part-time self-employed Total employment Private sector employment Reviving labour productivity
  9. 9. 9 But labour productivity growth is weak http://dx.doi.org/10.1787/888933189133 Reviving labour productivity 1. Labour productivity is defined as output per worker (i.e. real gross value added (GVA) divided by total employment). Contributions to growth are calculated using a weight of 0.67 for employment and 0.33 for productive capital; total factor productivity is calculated as a residual. Productive capital excludes investment in housing. Source : ONS (2014), "Labour Productivity, Q3 2014", Office for National Statistics, December, ONS (2014), "Capital Stocks and Consumption of Fixed Capital, 2014", Office for National Statistics, November and ONS (2015), "Labour Market Statistics, January 2015", Office for National Statistics. -5 -4 -3 -2 -1 0 1 2 3 4 1998 2001 2004 2007 2010 2013 Labour productivity growth with contributions Percentage points1 Capital-to-employment ratio Total factor productivity Labour productivity growth
  10. 10. Reviving labour productivity: Strengthening the real sector
  11. 11. Investment ratio is low 11 Reviving labour productivity: strengthening the real sector 1. In nominal terms. Investment refers to gross fixed capital formation. Latest data point shown is an average of the first three quarters of 2014. Source : OECD (2015), OECD Economic Outlook: Statistics and Projections (database), February. 10 15 20 25 30 35 40 45 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 Investment ratio Per cent of GDP1 OECD range United Kingdom OECD G7
  12. 12. 12 http://dx.doi.org/10.1787/888933189214 1. Figures refer to the following question: How would you assess general infrastructure (e.g., transport, telephony, and energy) in your country (from 1 = extremely underdeveloped—among the worst in the world to 7 = extensive and efficient—among the best in the world)? The aggregate for G7 countries excludes the United Kingdom. Source : World Economic Forum (2014), The Global Competitiveness Report 2014-2015 , Geneva. 1 2 3 4 5 6 7 POL SVK MEX ISR GRC ITA CHL HUN CZE IRL AUS SVN TUR NZL EST NOR GBR OECD KOR CAN SWE G7 BEL USA DNK LUX ESP PRT DEU FRA JPN ISL AUT NLD FIN CHE Perceived quality of overall infrastructure Index value from 1 (worst) to 7 (best)1 2014 Average of 2006-2014 Perceived quality of infrastructure is lagging  Continue to improve long-term strategy to attract private investors Reviving labour productivity: strengthening the real sector
  13. 13. Further easing product market regulation would support entrepreneurship 13  Relax licence and permits system and reduce barriers in services http://dx.doi.org/10.1787/888933189191 1. For antitrust exemptions the PMR score of the average of 5 best OECD countries is zero (i.e. least restrictive). Source: OECD (2013), OECD Product Market Regulation Database . 0 1 2 3 4 5 Admin. burdens for sole proprietor firms Communication and simplification of rules/procedures Antitrust exemptions Legal barriers to entry Admin. burdens for corporation Barriers in network sectors Barriers in services sectors Licence and permits system Barriers to entrepreneurship (overall) Product market regulation (PMR) score Index scale from 0 (least restrictive) to 6 (most restrictive)1 United Kingdom Average of 5 best OECD countries Reviving labour productivity: strengthening the real sector
  14. 14. Mismatches in employment are high 14 1. Data for the United Kingdom refer to England and Northern Ireland. Workers are classified as mismatched by qualification if they have higher or lower qualifications than required by their job and by field of study if they are working in an occupation that is not related to their field of study. The category of other includes mismatches by qualification only and by the combination of literacy, qualification and field of study. Source : OECD (2014), OECD Employment Outlook 2014 . 0 20 40 60 80 100 FIN AUS AUT DEU NLD BEL EST POL CZE SVK SWE KOR NOR DNK CAN IRL JPN FRA USA ITA GBR ESP Total mismatch among youth (16-29) by type of mismatch Per cent of all youth in employment1 Field of study and qualification Field of study only Other http://dx.doi.org/10.1787/888933189188  Improve skills to reduce workplace mismatches Reviving labour productivity: strengthening the real sector
  15. 15. Housing investment is historically low 15 Source: Department for Communities and Local Government, ONS (2014), "Annual Mid-year Population Estimates, 2013", Office for National Statistics, June and Datastream. 45 50 55 60 65 70 0 100 200 300 400 500 1950 1957 1964 1971 1978 1985 1992 1999 2006 2013 Permanent dwellings completed by tenure and population Private enterprises (left scale) Housing associations (left scale) Local authorities (left scale) Population (right scale) Thousand Million http://dx.doi.org/10.1787/888933189316  Relax land planning regulations Reviving labour productivity: strengthening the real sector
  16. 16. Real house prices have risen significantly 16  Greater housing supply is essential to balance the housing market Reviving labour productivity: strengthening the real sector Source: ONS (2015), "House Price Index, December 2014", Office for National Statistics, February and ONS (2015), "Consumer Price Inflation, January 2015", Office for National Statistics, February. 0 100 200 300 400 500 600 700 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 Real house prices Index Q1 1969 = 100 House prices, United Kingdom House prices, London
  17. 17. Reviving labour productivity: Ensuring sustainable financing
  18. 18. Important progress made to strengthen banks 18 o Prudential regulation has been overhauled and bolstered o Important measures taken to uphold underwriting standards for mortgages o Banks’ capitalisation has improved o Major reform to separate banks’ core and other activities (ring-fencing) o There are discussions about raising banks’ loss-absorbing liabilities Reviving labour productivity: ensuring sustainable financing
  19. 19. Business loans are low 19 Source: ECB (2015), "MFI Balance Sheets", Statistical Data Warehouse , European Central Bank, January and OECD (2015), OECD Economic Outlook: Statistics and Projections (database), January. 0 10 20 30 40 50 60 POL SVK CZE HUN GBR BEL DEU EST FIN IRL SVN FRA AUT NLD SWE ITA GRC ESP PRT DNK Loans to non-financial corporations Per cent of GDP, September 2014  Boost competition for business lending by widely sharing credit information http://dx.doi.org/10.1787/888933189276 Reviving labour productivity: ensuring sustainable financing
  20. 20. Business loans are still shrinking 20 1. 12-month growth rates. SMEs are defined as those with an annual debit account turnover on the main business account of up to GBP 25 million. Those with an annual debit account turnover on the main business account above GBP 25 million are termed "large businesses". Source: Bank of England (2015), "Monetary and Financial Statistics", Statistical Interactive Database , January. -7 -6 -5 -4 -3 -2 -1 0 1 2012 2013 2014 Loan growth of monetary financial institutions Per cent1 SMEs Large businesses  Support and regulate new credit providers to enhance credit availability http://dx.doi.org/10.1787/888933189078 Reviving labour productivity: ensuring sustainable financing
  21. 21. 21 Government plans are to raise infrastructure investment by 25% of GDP by 2020 and beyond Source: HM Treasury (2014), "National Infrastructure Pipeline 2014", December. 0 50 100 150 200 250 300 Research Waste Flood Digital Water Transport Energy Infrastructure pipeline 2014 GBP billion and number of programmes and projects Value Number of programmes and projects  Further develop public-private partnerships and public guarantees http://dx.doi.org/10.1787/888933189252 Reviving labour productivity: ensuring sustainable financing
  22. 22. Macroeconomic policies
  23. 23. Real wage growth has recently turned positive 23 Macroeconomic policies 1. Three month average for average weekly earnings. Regular pay excludes bonuses and arrears of pay. Source: ONS (2015), "Consumer Price Inflation, January 2015", Office for National Statistics, February and ONS (2015), "Labour Market Statistics, February 2015", Office for National Statistics. 0 1 2 3 4 5 6 2008 2009 2010 2011 2012 2013 2014 2015 Average earnings and consumer prices Year-on-year percentage change1 Consumer price inflation Regular pay growth
  24. 24. Spare capacity has narrowed 24 Source : ONS (2015), "Labour Market Statistics, January 2015", Office for National Statistics. 0 1 2 3 4 5 2006 2007 2008 2009 2010 2011 2012 2013 2014 Vacancies by industry Per 100 employee jobs Manufacturing Construction Wholesale and retail trade Accommodation and food services Macroeconomic policies  Start normalising interest rates when inflationary pressures emerge http://dx.doi.org/10.1787/888933189098
  25. 25. Capital should be allocated more efficiently 25  Higher interest rates would encourage needed corporate sector restructuring http://dx.doi.org/10.1787/888933189155 Macroeconomic policies
  26. 26. Recovery is insufficiently tax-rich 26 Source : OECD (2015), OECD Economic Outlook: Statistics and Projections (database), January. 36 38 40 42 44 46 48 50 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Budget deficit Per cent of GDP Deficit Expenditure Revenue Macroeconomic policies  Broaden the tax base, notably by taxing more the self-employed http://dx.doi.org/10.1787/888933189103
  27. 27. Further efforts are needed to reduce public debt 27 1. For details of the scenarios used see Figure 18 in the OECD Economic Survey: United Kingdom 2015. Source : Calculations based on OECD (2015), OECD Economic Outlook: Statistics and Projections (database), January and Office for Budget Responsibility (2014), "Fiscal sustainability report", July. 0 20 40 60 80 100 120 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 Debt simulations General government gross debt, Maastricht definition, per cent of GDP1 Baseline No productivity growth Less consolidation Less consolidation and no productivity growth Macroeconomic policies http://dx.doi.org/10.1787/888933189123
  28. 28. Equity effects of consolidation measures 28 1. Cumulative overall impact of public service spending, tax and welfare changes on households in 2015-16 as a percentage of 2010-11 net income (including households’ benefits in kind from public services). Net income quintiles adjusted for household size. Source : HM Treasury (2014), "Impact on households: distributional analysis to accompany Autumn Statement 2014", December. -4 -3 -2 -1 0 1 2 3 Bottom 2 3 4 Top All Equivalised net income quintiles A. Equity effects of UK consolidation Cumulative impact on households in 2015-16, per cent of 2010-11 net income, by income distribution1 Change in tax Change in tax credits and benefits Change in public service spending Net position Macroeconomic policies  Ensure fiscal consolidation is fair http://dx.doi.org/10.1787/888933189117

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  • AlbertValdez4

    Sep. 28, 2016

Presentation of the OECD Economic Survey of the United Kingdom 2015

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