What impacts economic change?

18/09/2013

By Daniel Hunter

New analysis of how countries respond to economic, political or societal change ranks the UK amongst the most robust when it comes to handling short-term negative shocks and longer-term technological risks, demographic changes, global competition and investment.

KPMG’s ‘Change Readiness Index’ (CRI) analyses 90 countries by focusing on reactions to change in their business environment, government and civil society. Produced in partnership with Oxford Economics, the CRI measures a range of indicators including the strength of national labour markets, trade policy, regulation, demographics and health.

It found that the UK ranks third in Western Europe - behind Sweden and Germany - but that its ability to recover from short-term shocks or capitalise on new opportunities is ahead of both the United States and China. According to the analysis, the UK is ranked in tenth place, marginally ahead of the US (12th place), with China coming in at twenty-eight.

Looking specifically at business environments and the ability of private and state-owned enterprises to manage change, the CRI ranks the UK 9th out of the 90 countries assessed. Britain fairs better, however, when it comes to its citizens’ ability to respond to the unexpected, only coming behind Sweden, New Zealand and Australia, in 4th place.

Alan Downey, head of public sector and KPMG’s UK lead on International Development, says: “In the face of sudden shocks and long-term change some countries are better than others when it comes to mitigating risks or seizing opportunities and it seems that the UK is amongst the most resilient.

“Of course, the way any country responds to, anticipates, and takes advantage of change has a significant impact on its ability to achieve sustained growth and share the benefits of that growth with its citizens. In Britain’s case, Government and business appear to be combining effectively to ensure that we are able to compete on the global stage, today, and become a major player, tomorrow.”

Other key findings show that Britain is well placed to handle significant societal or political changes. Closer analysis of the data shows, for example that Britain ranks:

- 1st when it comes to uptake of new technology
- 2nd when willingness and ability to develop new skills are considered
- 4th when regulation is considered, suggesting the UK’s legislative environment is ready to drive growth
- 12th when the health of the nation is factored into equations, suggesting that the workforce is able to perform at or near peak levels.

Among other key findings, the CRI revealed that wealth does not always determine a country’s ability to respond to and manage change, with a number of lower income countries ranked as having greater change readiness capability than some more developed countries. Chile, for example, ranked higher in the index than many high income countries, including the United States and France. The likes of Panama and the Philippines also outperformed the likes of Italy, Poland, Brazil and China.

“Wealth and high per capita income are closely correlated with change readiness, but income is not an insurmountable barrier to enhanced economic and social resilience,” said Alan Downey. “This is an encouraging message for lower income countries, where strong institutions and governance can provide stability in time of stress and potentially open the door to new opportunity.”

http://www.internationaltrade.co.uk/news.php?CID=&NID=2477&Title=What+impacts+economic+change%3F