Report on Progress towards a Knowledge Driven Economy

The Trade & Industry Select Committee has published its report on Progress towards the Knowledge Driven Economy. Members of the UKTECH network were among the organisations and businesses who contributed a submission to the Committee.

Conclusions

Among the Report's conclusions are:

• The UK's science and knowledge research bases and business are collaborating more frequently in joint research projects and the UK's universities have improved their ability to exploit the intellectual property they create. Overall, however, the UK's performance in knowledge exploitation against its main competitors has been disappointing. Since 1998 the UK's relative position against the rest of the G7 has remained unchanged, while the performance of other, emerging competitors has improved. Business investment in R&D and higher education has fallen, the quality and value of spinouts from the UK research base remain in question and the UK's patent record in its main commercial markets has remained poor. The Government has a role to play in encouraging better performance in all of these areas.
• If increased productivity is to be achieved through effective ICT investment, a workforce with better ICT skills is needed. Although government has a key role to play in equipping workers with the basic ICT skills they require, this should not be the sole responsibility of the public sector. Businesses are the ultimate benefactors of a well trained workforce and it is their responsibility to enable their employees to improve their ICT skills.
• The Committee found evidence of a positive benefit to the UK from outsourcing abroad (offshoring) services and functions, in that it can provide UK businesses with solutions to specific needs at an economic cost. However, businesses need to be sure that these benefits are weighed against the costs they could incur from moving overseas and from reduced consumer confidence at home.
• The Government has suggested that job losses in the services sector, particularly in customer contact centres, through offshoring will not be high and will be offset in the same way that lost manufacturing jobs have been made up by new service sector jobs. However, while most of the manufacturing industries that have been transferred have not been strategic in nature, this might not prove to be the case in sectors such as financial services. The Government should keep this trend in business practice under review.

Martin O'Neill, Chairman of the Committee, said: "The 1998 Competitiveness White Paper; Our Competitive Future: Building the Knowledge Driven Economy proposed a ten year programme of Government support to enable the UK to close the productivity performance gap with its main competitors by exploiting the potential benefits of a modern knowledge-driven economy. More than six years on, we have reviewed the progress made towards that objective. Progress has been made, but there remains some way to go before the UK economy matches the productivity levels of its main competitors. The future performance of knowledge-based industries will remain crucial if the UK is to close this gap."

UKTECH

The main points raised by members of the UKTECH network relating to outsourcing were:

• UK plc: By exporting jobs and sectors of the knowledge-based economy, UK plc is removing much of its own ability to compete in a global economy by exporting its requirements for a skill base and removing incentives to train, work in and develop the UK's own technological industry.
• False economy: Companies are being short sighted to try to take advantage of what seem to be lower costs in the short term by outsourcing some services overseas. However, the disadvantages of working from an overseas location with cultural, language and quality differences can make this a false economy in the longer term.
• Tax take: It reduces the tax-take for this country via individuals' payroll bills and company investment and therefore has a knock-on effect on the Government's ability to provide public services.
• Fast track visas: The other side of the coin which raised significant comment is that not only are companies outsourcing jobs and sectors, but they are also bringing overseas labour into the country at a cheaper rate via the fast track visa schemes, which also prevents UK freelancers competing on equal terms. This is particularly prevalent in IT-related positions.

Full copies of the Report are available on the Parliamentary website:

Progress towards the Knowledge Driven Economy - Eighth Report, 22 March 2005