The suggested increase in UK economic growth from the IMF (International Monetary Fund) and others over the past couple of weeks has been encouraging. Such positive forecasts engender positive belief: positive belief by directors and owner-managers that their firms will enjoy future prosperity. And positive belief causes directors and owner-managers to invest. Positive belief is good for the UK.
But care is needed. On the one hand, a 2.4% increase in GDP in 2014 would be very welcome. On the other, the UK economy is 80% service, 20% industrial. And we have what’s called an ‘hour-glass’ jobs market. There are good, highly paid jobs for designers and programmers at the top of the market and a raft of near-minimum wage process jobs in service at the bottom – and very little in between.
If GDP growth comes at the bottom, this favours long-term instability and collapse of sectors like housing that rely on employees having long-term spending capability and high credit ratings.
So, rather than rejoice, government needs to take a long-term view. We need to re-polarise our national strategy towards investment in people. An hour-glass economy spawns inequality and division. Government needs to identify that an hour-glass economy is not good and plan a future that will allow all employees meaningful careers.
To coin a military adage, we look like we might win a major battle this year, but we’re a long way from winning the war. And we need a people and skills-centric strategy for that.