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2007 OECD Economic Surveys: United Kingdom 2007

image of OECD Economic Surveys: United Kingdom 2007

This 2007 edition of OECD's periodic economic survey of the British economy finds that the UK has embraced globalisation and has been rewarded with strong growth and performance, but that the near-term outlook is more uncertain, given recent financial market turbulence. Among other issues, it looks at key challenges including globalisation, raising educational achievement, improving work prospects for the least skilled, the productivity gap, and tax competition.

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Addressing the productivity gap

The United Kingdom has recorded strong productivity growth over the past decade, surpassing the performance of many continental European countries and thereby narrowing the productivity gap. However, despite narrowing substantially in the early 1990s, the productivity gap with the United States has remained unchanged more recently. While overall the United Kingdom has some of the least restrictive product and labour market regulations, it needs to guard against increasing red tape and tax complexities which can raise the costs of doing business. Restrictive planning regulations make entry of new firms in retailing difficult and inefficient land use raises property prices. Poor transport infrastructure is another potential factor reducing productivity growth, while R&D spending and adult training are relatively low.

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