Firms, Institutions, and Governance
______________________________________________________________ 4.1 INTRODUCTION After more than a decade of continuous economic growth and stable macroeconomic indicators, the UK enjoys today some of the highest rankings globally in several economic performance indicators. This solid economic performance has been related to sound monetary and fiscal policies in conjunction with traditional commonwealth ties, flexible labour markets as well as a large and healthy service sector. Inflation has also been kept low during the past decade partly due to the Bank of England efforts to that extent. Likewise, the unemployment rate has been one of the lowest in the EU and among OECD countries, typically performing under 5% in the past few years while also attracting increasing numbers of migrant workers. So, in many senses, it looks as if the UK economy has been able to reap the benefits of a rapidly globalising economy, leaving behind the severe bottlenecks of the 1970s and 1980s (OECD Observer, 2006). Yet, for the UK to count as a ‘miracle economy’ important challenges lie ahead, not least those related to GDP per capita, which is performing averagely among OECD countries due to large income disparities within the country, or the productivity ratio per hour, which is only 15th among the OECD countries (OECD 2005). The latter survey also pointed at other structural challenges to the British economy, the most important of which for the purposes of this study are: to improve labour education and skill levels, to increase technological absorption and innovation, and to redress many years of underinvestment...
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