Only the knowledge economy can provide the jobs and balanced growth needed to secure the UK’s future prosperity, according to a plan for growth published today by The Work Foundation.
The report sets out a vision of what a balanced and sustainable economy could look like in 2020 and provides a detailed picture of the measures needed to secure this future.
The report argues that while the Government has taken some positive steps - such as creating Technology and Innovation Centres - it has yet to establish a coherent approach to the knowledge economy.
The Work Foundation argues some of its most expensive policies, for example enterprise zones and the corporation tax cut, are based on a "backwards looking view" of the economy and will do relatively little to drive lasting growth.
Drawing on two years of research, with input from businesses, third sector organisations and the public sector, A plan for growth in the knowledge economy says a return to growth based on financial services, property and a self-sustaining construction 'bubble' is no longer an option.
The Government must instead safeguard the future of the knowledge economy by focussing on key priority areas, such as securing the supply of highly skilled workers through higher education, and putting in place the local economic conditions needed for high growth firms to thrive.
Lead author and senior economist, Charles Levy, said: "The UK economy is at a crucial tipping point. The coming decade will determine whether the UK emerges from the financial crash as a stronger, more stable economy, or whether it drifts into stagnation and stubbornly high unemployment. If we are to avoid another financial crisis, the UK must eschew debt-fuelled growth and back that part of the economy which is driven by expertise and new ideas - the so-called 'knowledge economy'.
"The knowledge economy is now an inescapable economic reality. Founded on technological progress, advanced products and highly skilled workers, it has driven UK growth for the last 40 years, contributing 66% of all growth since 1970 and 7.3 million new jobs since 1978. It must now be recognised and supported as the only viable route to a sustainable, balanced economy for 2020.
"The knowledge economy has transformed how we work and how the economy creates both jobs and income. Without it, we cannot hope to maintain current wage levels and consumption habits. The UK needs a coherent policy agenda that reflects these changes. Traditional measures such as sweeping tax breaks and blanket reforms will not achieve the stable, lasting growth we need."
Commenting on the report, Adrian Bailey MP, chairman of Business, Innovation and Skills Select Committee, said "Securing the future of our economy is Britain's top priority, and The Work Foundation have provided a clear vision of how we can achieve that. The report sets out a clear and wide-ranging overview of the policies that are needed to create jobs in our knowledge industries. The government must take these recommendations seriously, and put in place the right measures to sustain the recovery."
Levy added: "The Government's top priority must be to put in place arrangements that can sustain our future expansion in higher education and ensure that we remain open and attractive as a destination for global talent. Delivering the workers for our knowledge economy must be complemented by action to secure the fundamental local economic conditions under which high growth firms can thrive. There must also be a shift in thinking on innovation - as well as focusing on the traditional areas of high-technology, STEM, and R&D activities, policy must fully embrace our creative advantage and take a truly broad view of how we invest in the future."
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