What factors caused the drop in the UK's Global Competitiveness Rank in 2007 - 08?
by
ctrounce94mailcom (student)
Question 3 – Callum Trounce
- One factor which may have contributed to the fall of the UK’s Global Competitive Index is productivity. The GCI is a comparison between different countries; this means that the fall UK’s productivity is relatively larger. The economic crisis can be seen as a reason to cause a drop in productivity as the crisis occurred around the same time period, making it feasible. The crisis caused firms to have profit to reinvest (or no profit at all) and so research and development will be neglected. If R & D is neglected, improving productive efficiency will become a slower process which would lead to unit costs being more expensive than foreign competitors. A higher unit cost means that exports from the UK are likely to become more expensive as firms raise their prices to cover labour costs. This means that the UK becomes less competitive globally and therefore can be seen as a contributor to the fall in GCI for the UK. This can be backed up as the BoP for the UK was at its most negative point in 2007.
