2010: the year of competition

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• 2009 was a bad year for competition in the UK economy. The short term effects of the recession are inevitably anti-competitive: fewer firms in markets and fewer resources for firms to spend on new business ventures. But policy decisions have worsened the situation. EU state aid rules have been weakened. The UK Government’s industrial strategy is already diverting firms away from core activity and towards attracting government interest and support. In the UK public sector, Government made the public sector the “preferred provider” of NHS care. 

• Competition is in the public interest and stimulates wealth creation, innovation and diversity. Monopoly has the opposite effects. Academic research indicates that anti-competitive legislation lengthened the Great Depression (by seven years) and the Japanese recession of the 1990s.

• 2010 needs a new approach. The goal of competitive markets hasn’t changed but its urgency has increased.   The political focus on deregulation is important but will not deliver competitive gains in and of itself – competition needs active support to deliver its full benefits.  Market failure must be challenged and actively addressed.  That will mean a new business strategy focused on improvement of the general business environment rather than support for industries in difficulty; the renewal of competition in the banking sector; the reversal of EU state aid changes and the introduction of competition in the big UK public services of health and school education.