UK Economy: can we ever catch Germany?

While we in the UK squeeze every drop of comfort out of some slightly better than expected inflation and jobs figures, Germany continues to enjoy life on an entirely different economic planet thanks in large part to its exports to China which today's data shows is an economy still growing at a stunning rate. Some were arguing a while back that Germany's success was all due to a temporary surge brought on by business restocking after the recession. Not many believe that now.

While we in the UK squeeze every drop of comfort out of some slightly better than expected inflation and jobs figures, Germany continues to enjoy life on an entirely different economic planet thanks in large part to its exports to China which today's data shows is an economy still growing at a stunning rate. Some were arguing a while back that Germany's success was all due to a temporary surge brought on by business restocking after the recession. Not many believe that now.

 But as if that wasn't enough to envy, Daniel Schafer reveals on the indispensible Beyond Brics blog that more money is flooding into Germany as Chinese companies invest and buy up German companies. Schafer argues that this is the direct result of the contacts and good will German firms have developed by investing in Chinese markets to build their export industries. So Germany not only has a booming export industry while much of the rest of Europe limps on, it is also attracting capital investment in its own companies from the world's most dynamic economy.

 By contrast the UK lags terribly.  The Chancellor may want to emulate Germany and transform us into an export led economy but the FDI data tells its own story.  According to the OECD, average UK FDI flows over the period 2000-2010 into China amounted to an average of $956 million each year, compared to $1,990 million for Germany.  So Germany invested more than double into China over the last decade even though its economy is only approximately one third larger than the UK’s.

 The RSA will soon be launching a new programme looking at enterprise and innovation.  It will clearly have its work cut out if the UK is going to stand a chance of catching the new world-shapers like Germany.