How to deliver high growth in a low-growth economy

By Hywel Ball, UK Chair, Ernst & Young LLP

Policy makers and business leaders gathering at the World Economic Forum in Davos this year are facing the same challenge – how to deliver high growth in a volatile, low-growth economy?

In an environment of monetary tightening and persistently high inflation, the recovery in the global economy remains fragmented and sluggish at best. The global economy is predicted to grow by 2.8% this year while here in the UK, our EY ITEM Club is forecasting growth of 0.7% in 2024.

Not since World War II has the macro environment been a bigger factor in shaping business performance. From climate change to global conflicts and disrupted supply chains, businesses are having to mitigate and navigate numerous macro challenges.

But growth cannot be created in a vacuum. We need a dynamic economy that’s vibrant, growing and attractive to international investors, underpinned by a society with world-class skills and capabilities – including in technology – and where there’s opportunity for all. This multifaceted environment needs to be developed and nurtured by our politicians and the business community.

Realizing this vision for the UK will require many different actions by organisations across the public and private sectors, often working in collaboration. But I believe there are several common threads. We need a clear strategy for global technology cooperation and leadership; commitment and investment in skills; a focus on driving activity and innovation across the UK’s regions; and – underpinning all the others – consistency and long-term thinking in decision-making, including around regulation and policy.

Encouragingly, I believe there are already positive signs in each of these areas, with the potential to strengthen these foundations to accelerate growth.

On technology, the UK Government’s Global AI Safety Summit held in Bletchley Park in November last year was the kind of bold initiative that can bring nations together and demonstrate the UK’s leadership in emerging technologies. Harnessing the opportunities presented by technologies like AI will be the challenge of our generation. Our latest CEO Outlook survey showed that 74% of UK CEOs believe their organisation must act now on generative AI (GenAI) to avoid giving their competitors a strategic advantage.

On talent, we welcome the commitment to the skills agenda across the political spectrum. Boosting the UK’s skills base, particularly around in-demand areas such as AI, provides an opportunity to help improve productivity and competitiveness. This is also important when it comes to regional economic development. Redressing the skills balance across the UK is a key driver to addressing underlying productivity issues and ensuring prosperity and growth reaches all corners of the country.

Policy consistency and long-term thinking are obviously more challenging with a UK General Election on the horizon. But it was clear from the latest round of political party conferences in the UK that there’s growing acceptance across the political divide of the need to avoid the uncertainty and ambiguity that can deter investors.

Technology and talent, when supported by long-term decision making, are the UK’s co-pilots to growth. They have the potential to build on the UK’s existing strengths to accelerate growth. Our latest UK Attractiveness Survey showed the UK is already ranked as the leading destination in Europe for Foreign Direct Investment projects in digital tech. And while investors overall rate the UK relatively low on skills, they do rank its education system highly, suggesting they believe it can close the gap.

I’ve also seen from our own experience at EY just how transformative these factors can be. Over the past three years, and in the face of considerable headwinds, we’ve delivered market-leading growth that’s outpaced our peers. In FY23, the EY organization achieved 16% growth and delivered record UK revenues.

To achieve this success we’ve invested heavily in talent, creating new entry routes into the profession through apprenticeships, while also making significant investments in our technology capabilities. In FY23 we hired over 5,000 people in the UK and welcomed over 1,800 graduates, school leavers and interns with 40% based in regional locations. We’ve created a new artificial intelligence (AI) platform – EY.ai – following a US$1.4b global investment and are rolling out AI training for 400,000 EY people across the world.

Driving a national recovery, from low-growth to a high-growth economy, will take collaboration from all parts of the public and private sectors but, in my mind, talent and technology are key. They are the foundations on which to grow both our own business and UK GDP.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.