Measuring International Competitiveness

"We have some of the greatest companies, some world class sectors, some global champions in
whom we do and should take pride. But let us face facts. We have not enough of them and over
the last 50 years, productivity growth in Britain has been just over two and a half per cent a
year, compared to between three and a half per cent and four per cent among our main
European competitors"

Gordon Brown, Speech to the British Chamber of Commerce, April 2000

Competitiveness is the ability of a nation to compete successfully internationally and sustain

improvements in real output and wealth. There is no unique measure of competitiveness. We can
use tangible measures such as unit labour costs, comparisons of GDP per worker, long-run
average growth of real GDP and the IMD’s Global Competitiveness Report. 

The chart above shows relative unit labour costs for the UK against our major trading
competitors. A rise in the index signifies a worsening of Britain's competitive position. Clearly in
the last few years we have see a sharp rise in relative unit labour costs. 

The main explanation for this is the sustained appreciation in the value of the exchange rate
against other currencies. This has caused problems for exporters and domestic businesses who
face severe competition from imported goods and services. Another reason is the relatively slow
growth of manufacturing productivity - raising questions about why certain British industrial
sectors lag behind in productivity against their major competitors.

 
 

 
The chart below shows the growth in real GDP for the UK.  There is a rise in the long run trend,
however it is susceptible to short run changes that are accounted for by cyclical factors.

A better method of international comparison is to use GDP per worker data as produced by the
Office of National Statistics.  In the table below UK figures are indexed at 100.

France Germany Japan USA G7 G7-UK

 

1992 128.6 108.3 103.9 137.1 120.8 122.8

1993 125.6 107.4 104.1 138.4 121.3 123.2

1994 124.6 111.1 103.4 138.5 122.0 124.0

 1995 127.8 115.2 108.1 139.4 124.9 127.1

1996 120.8 110.0 106.6 136.6 121.9 124.0

1997 117.2 110.2 104.5 137.5 121.4 123.3

1998 115.2 107.2 100.5 137.3 120.0 121.8

1999 114.9 107.3 100.8 139.0 120.9 122.9

2000 114.4 106.6 100.9 141.6 121.9 124.0

 

Further information can be obtained by comparing the GDP per work per hour, again the UK is
indexed at 100.

France Germany Japan USA G7 G7-UK

 

1992 135.1 118.6 91.4 131.8 117.6 119.2

1993 131.8 118.6 94.1 131.4 118.1 119.8

1994 132.0 124.2 94.6 131.7 119.5 121.2

1995 137.7 131.0 99.8 131.8 122.6 124.6

1996 130.6 126.6 98.0 129.1 119.7 121.4

1997 126.9 127.1 97.3 129.2 119.1 120.8

1998 124.4 122.9 94.5 127.4 117.3 118.9

1999 123.8 122.8 94.2 127.7 117.4 119.0

2000   123.0   128.9    

It is also possible to look at the world competitiveness scoreboard and a graphical
representation.  The following page basically outlines how it is calculated.