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An update on the UK economy (apart from Brexit)

5 min read

21 October 2019

Features Editor, Real Business

This is what's going wrong in the UK economy (aside from Brexit) including a damaged investments sector, stalled infrastructure plans and SMEs struggling to offer apprenticeships.

Maybe the Brexit chaos (and its associated delays) aren’t really to blame for economic uncertainty in the UK right now? Could it be the government’s over-focus on the issue at the expense of other business concerns that’s really doing it?

But what are the main problems the government, the business community and the rest of us ignoring to our peril?

1. We’re not ‘saving’ for the future

The UK isn’t being ‘pro-pension’ enough, according to Lord King.

According to former Bank of England governor, Lord King, the UK has “one of the lowest savings rates” in the world. King added that Argentina was one of the few countries that lagged behind the UK on this, (which is a concern seeing that the UK is meant to be one of the economic and financial superpowers in the world).

Neither are we saving enough to “finance our pensions“, he added.

* Our investment sector’s ‘rep’ is damaged

A sketchy investment environment will be a touchy subject for some considering the news that one of the UK’s biggest fund managers, Neil Woodford has left his giant fund in tatters where billions of pounds from ordinary investors are at risk.

Analysts say this could affect the livelihood of the UK’s entire financial investment sector by attracting greater regulation. Investment giant, Hargreaves Landsdown is particularly affected by this event where as many as  300,000 of its clients have been financially compromised by the failed fund.

* Our infrastructure projects are poorly executed

Neither, King says, are we providing sufficient savings to care for the elderly, nor are we preparing or providing adequate finance to fund infrastructure projects in the UK.

If we look at current infrastructure politics, this is true. Take the ongoing HS2 debacle for example,  a mammoth infrastructure project that’s been defined by indecision, reckless spending and U-turns since it began.

2. We’re failing to prepare young people for the workforce

Are kids learning enough in schools to enter careers in AI?

Is the government doing enough to help 50% of school leavers enter work?

King then made reference to the fact that as many as “50%” of school leavers don’t attend university. Is the government doing enough to upskill them for work?

This means smaller businesses are unable to access funding to provide apprenticeships for interested candidates.

With rising tuition costs for university, candidates from low-income households and ethnic minority backgrounds could find themselves barred from higher education, and instead, face limited numbers of apprenticeship opportunities. But where’s the evidence?

3. SMEs are being hit the hardest on apprenticeships

According to House of Commons statistics on apprenticeships from this year, there were 94,000 fewer people starting apprenticeships in 2017-2018 than in 2016-2017.

What’s interesting is at the same time, the numbers of young people taking them up are increasing, showing there’s demand for school leavers wanting to gain vocational skills for the world of work.

* Smaller firms are struggling

4 ways apprentices can help boost small businesses

Smaller businesses are struggling to get funding for apprenticeships.

Why are UK businesses failing to stimulate the apprenticeship economy? Well, the introduction of ‘The Apprenticeship Levy’, a compulsory tax, (set at 0.5% of the value of the employer’s
pay bill), might have something to do with it.

There’s little money left over

SMEs are inadvertently being hit by this tax. While some of them are too small to have to pay it, (to be taxable a business’s payroll bill has to be at least £3m), many rely on funding money being left over after larger businesses have “taken back their entitlement.”

This means smaller businesses are unable to access funding to provide apprenticeships for interested candidates.

The Association of Employment and Learning Providers, (that represents firms offering apprenticeship training), said that “three-quarters of training providers could no longer meet the demand for apprenticeships from SMEs, while 17% of providers have stopped recruiting apprentices for existing SME customers altogether.”

4. Late payments are getting worse

Despite the government’s attempts to publically shame big businesses for engaging in ‘late payments’ culture, (cue* Holland and Barrett being publically called out in the media earlier this year), the problem’s only getting worse. To quote Pimlico Plumber’s Charlie Mullins, there’s been a “22% increase” in small firms seeking legal aid to combat delayed payments this year: