Turmoil in financial markets across the world has shone a spotlight on the vulnerability of the UK to external shocks. In recent years, the UK economy has performed strongly in comparison to other developed economies; net employment has increased by more than every other Eurozone country put together. However, despite this labour market success and sustained economic growth, external factors ranging from the slowdown in China to persistent Eurozone weakness endanger what is, so far, a fairly resilient domestic situation.
Alongside this, the UK faces two key challenges; eliminating the still large budget deficit and raising underlying productivity growth. The Chancellor should use the Spending Review on the 25th November not only to outline departmental spending cuts but also a series of measures which will contribute to improving the UK’s poor productivity performance.