How competitive is the UK economy?
When talking about competitiveness we are talking about comparative advantage when comparing the UK with the rest of the world. Comparative advantage of one country over another occurs when a certain country can produce a good at a lower opportunity cost i.e. if it has to forgo less of other goods in order to produce it.
There are certain goods and services in which Britain does have a certain comparative advantage and does it is favourable to trade with other countries on certain terms. An example of this is in the production of Heavy duty manufacturing building equipment in particular diggers by the British company JCB. This market is a duopoly almost with JCB and the American firm Caterpillar having a very large share of the world market. We can see that JCB equipment is still being built in this country because it must have a certain level of comparative advantage maybe in terms of skills of the labour force or the technology within the country which means that it is still profitable to produce the item in the UK. However this can work against the UK as well, which is seen by the movement of call centres from the UK to India, due to comparative advantage. This arises due to labour cost difference between the 2 countries, because India has a massive labour cost advantage over the UK an as a result it has a lower opportunity cost: UK is not competitive in call centres.