The United Kingdom should make itself the European location of choice for multinational corporations, give its cities more power to determine their economic destinies, and unshackle its education and health sectors so they can take advantage of the potential for international growth.
These are among the recommendations of a new report, From austerity to prosperity: Seven priorities for the long termpublished by McKinsey’s London office and the McKinsey Global Institute (MGI). The report identifies critical areas the United Kingdom must tackle in order to build a stronger economy:
- Productivity growth has been encouraging (exhibit), but overall levels are still 17 percent below those of the United States and 10 percent lower than Germany’s. The United Kingdom should promote improved productivity within sectors rather than trying to change the economy’s sector mix. Removing regulatory barriers, lifting land use restrictions, and improving the quality of management and the skills of employees are essential to the effort.
- Multinationals may account for less than 2 percent of UK businesses, but they drive overall economic growth. Government should work with leading multinationals on a ten-year plan to develop the skills of the workforce, ensure access to international skills through open immigration, improve the physical and social infrastructure, and create certainty about future taxation and regulation.
- Transport and energy infrastructure will require more than £500 billion in investment over the next 20 years. But private investors will participate only if there’s greater regulatory certainty and if returns improve.