Long-term trends and strategic challenges
Competing in the new global economy
Globalisation is reshaping the economy of the East of England. The UK and its regions have long been operating in highly competitive global markets. The East of England must continue to seek opportunities in international markets and remain fully aware of the challenges presented by competitor regions and emerging economies.
The region’s relationship with the rest of the world is growing in importance - between 2003 and 2004, East of England exports grew by 9.8 per cent in value, exceeding the average UK growth rate. The region is already the third biggest exporting region in the UK after London and the South East. Export markets in EU accession countries, Latin America and the Caribbean are significant for the region relative to the UK. Trade opportunities will continue to increase in line with recent trends. As Figure 5 shows, the value of world merchandise exports increased from US $5.4 trillion in 1996 to $12.1 trillion in 2006. World exports in services are also growing markedly - up from a value of US $1.2 trillion in 1996 to US $2.8 trillion in 2006.
Inward investment will continue to be important for the region. The UK remains a leading location for foreign direct investment (FDI) and headquarter operations in Europe, with a total of 204,000 jobs created from FDI projects in the UK between 2001 and 2007. In the East of England, the number of inward investment projects successfully completed each year has been on an upward trend since 1999, with 52 in 2006/07 compared to 41 in 1999/00.
Markets are becoming more open and flows of trade and investment are growing. This is largely due to economic growth and development in emerging economies such as Brazil, China, India, Russia, Mexico, Taiwan and South Korea. Many of these emerging economies have grown at rates exceeding the UK’s growth rate. In 2005, India and China achieved annual economic growth rates of 5.4 per cent and 10.2 per cent respectively. The UK, alongside other major European economies, is forecast to account for a smaller share of global output growth as emerging economies expand.
Globalisation offers many opportunities and benefits for the East of England. This includes new or expanding markets for regional goods and services, the potential for international collaboration in research and innovation or as a source of skilled workers.
Alongside the opportunities, there are challenges. The world is becoming more competitive, and the emerging economies are competing on factors other than cost. China is projected to double its present rate of investment in R&D to 2.5 per cent of GDP by 2020. A survey of leading multi-national corporations indicated that 75 per cent of planned new R&D facilities are to be built in India or China.
Advanced industrialised regions such as the East of England will continue to compete in the new global economy. The East of England retains significant economic advantages in the global marketplace - not least leading technology companies and research capability, proximity to London - the world’s leading financial market - and international transport gateways. However, to guarantee the region’s competitiveness, we need to enhance performance across the board in terms of the region’s enterprise base, skills, innovation activities and assets. Businesses and organisations will also have to adapt to new pressures brought about by the growing demand for resources, demand from emerging economies and global uncertainty. This includes rising food, energy and fuel prices which will impact on many sectors, not least those operating in international commodity markets such as agriculture and food processing and manufacturing.
