Presentation of the 2017 OECD Economic Survey of United Kingdom

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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GDP growth has slowed

Source: OECD Economic Outlook: Statistics and Projections Database.

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Valuations of UK-oriented firms are lower

Source: Thomson Reuters Datastream.

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Net migration has been falling since mid-2016

Source: Office for National Statistics.

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Labour productivity is at a standstill

Note: PPP: purchasing power parities.

Source: OECD Productivity Statistics Database.

4

Unemployment rate is at a 42-year low

Source: OECD Economic Outlook: Statistics and Projections Database.

5

Job creation has become more diversified

Source: Office for National Statistics.

6

Higher inflation has reduced real incomes

Source: Office for National Statistics.

7

Households smooth their consumption

Source: Office for National Statistics and Bank of England.

8

Sterling’s fall may not restore competitiveness

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.

9

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.

10

Average maturity of public debt is high

Source: OECD Sovereign Borrowing Outlook 2017.

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Taxes paid vary by job type

Note: NICs: National Insurance contributions.

Source: Office for Budget Responsibility.

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Key macroeconomic recommendations ➢ 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.

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Reducing Regional Productivity Gaps

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North-South divide in regional productivity Gross value added per hour

Source: Office for National Statistics.

15

Productivity of the average city is low

Source: OECD Regional Statistics Database.

16

London’s productivity is high across sectors

Source: Office for National Statistics.

17

High infrastructure spending prevails in London, supported by Transport for London

Source: HM Treasury.

18

Lagging regions rely more on EU funds

Source: Sheffield Political Economy Research Unit and Office for National Statistics.

19

Skills are lower in less productive regions

Source: OECD Regional Statistics Database and Office for National Statistics.

20

Decentralisation is comparatively low

Source: OECD Regional Statistics Database.

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Key recommendations on regional productivity ➢ 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.

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Raising Low-Skilled Productivity and Job Quality

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Many adults have only basic skills

Source: OECD (2016), "Building Skills for All: A Review of England", OECD Skills Studies.

24

Similar shares of low-skilled youth and elderly

Source: OECD (2016), "Building Skills for All: A Review of England", OECD Skills Studies.

25

Investing in early childhood education is key

Source: OECD (2017), Education at a Glance 2017: OECD Indicators.

26

Skills are low at all education levels

Source: Calculations based on the PIAAC database.

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Many students exit education relatively early

Source: OECD (2016), Education at a Glance 2017: OECD Indicators.

28

Participation in vocational education is low

Source: OECD (2014), "Skills Beyond School: Synthesis Report", OECD Reviews of Vocational Education and Training.

29

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.

30

Minimum wage is being raised to a high level

Source: Eurostat.

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Self-employment could be used to bypass minimum wage regulations

Source: Office for National Statistics and Eurostat.

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Key recommendations on low-skilled productivity and job quality ➢ 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.

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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.

http://www.oecd.org/eco/surveys/economic-survey-united-kingdom.htm

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