Work Foundation calls for highly-skilled workers to drive knowledge economy

Only the knowledge economy can provide the jobs and balanced growth needed to secure the UK's future prosperity, according to a plan for growth published by The Work Foundation.

Economists commissioned by the independent labour market think tank said a return to growth based on financial services, property and a "self-sustaining construction bubble" was no longer an option.

The authors of the new report called on the government to safeguard the future of the knowledge economy by focusing on the supply of highly skilled workers through higher education and putting in place the local economic conditions needed for high-growth firms to thrive.

Senior economist Charles Levy, the report' s lead author, said the UK economy had reached "a crucial tipping point" .

"The coming decade will determine whether the UK emerges from the financial crash as a stronger, more stable economy, or whether it drifts into stagnation and stubbornly high unemployment.

"If we are to avoid another financial crisis, the UK must eschew debt-fuelled growth and back that part of the economy which is driven by expertise and new ideas - the so-called 'knowledge economy'.

"The knowledge economy is now an inescapable economic reality," he said.

The report, titled "A plan for growth in the knowledge economy" sets out a vision of what a balanced and sustainable economy could look like in 2020 and provides a detailed picture of the measures needed to secure the vision.

It praises the creation of technology and innovation centres as among positive steps taken by the government, but argues that Whitehall has yet to establish a coherent approach to the knowledge economy.

Enterprise zones and a cut to corporation tax are criticised in the report as based on "a backwards looking view of the economy" that would contribute little to lasting growth.

Levy said the knowledge economy had driven UK growth for the last 40 years, contributing two-thirds of all growth since 1970 and 7.3 million new jobs since 1978.

"It must now be recognised and supported as the only viable route to a sustainable, balanced economy for 2020," he said.

"The knowledge economy has transformed how we work and how the economy creates both jobs and income. Without it, we cannot hope to maintain current wage levels and consumption habits.

"The UK needs a coherent policy agenda that reflects these changes. Traditional measures such as sweeping tax breaks and blanket reforms will not achieve the stable, lasting growth we need."

The report's authors said the knowledge economy could not continue to grow without an increase in the number of highly skilled, appropriately trained workers and called on the government to continue reform of higher education funding by sustaining future expansion in numbers and introducing  strong incentives for teaching excellence.

Commenting on the report, Adrian Bailey MP, chairman of the Business, Innovation and Skills select committee, said securing the future of the economy was the nation's top priority.

"The report sets out a clear and wide-ranging overview of the policies that are needed to create jobs in our knowledge industries.

"The government must take these recommendations seriously, and put in place the right measures to sustain the recovery."

The report calls on public and private sectors to work more closely together and end "adversarial engagements", and calls for the public sector to provide the best possible infrastructure for the knowledge economy.

Economist Vicky Pryce of FTI Consulting welcomed the findings. "The UK's long-term prosperity depends on both public and private sectors investing in the creation of knowledge and in having a system capable of exploiting it successfully.

"It is important the effort is maintained even in these difficult times," she said.