Two very different reports drop into my inbox. One from the Legatum Institute, a swish new London-based think-tank with a right wing focus.

It ranks Britain thirteenth in the global prosperity league, a composite of subjective-seeming measures of governance, health, education, personal freedom, economic growth and social capital. Not so good on economic growth, true, but high on entrepreneurialism, governance and personal freedom. So what? you may say. But look at the rivals. France 21st place, Italy 33rd. USA 12th, even mighty Germany 14th. Germany - less prosperous than the UK! At least according to Legatum.

The countries doing better than the UK are all the usual suspects, small northern countries like Norway, Netherlands and Canada. The UK is the best scoring large European country.

Then there's the other report in my inbox, This time from the European Commission, it paints a very different and more familiar picture. It's the annual European Competitiveness report. Its headline statistic - in a very big report, with dozens of tables - is this one: exports. It looks at how much each EU country exports compared to other EU members and finds that Germany is by far the EU's biggest exporter, at 26 percent of the total EU export share, looking at both global and intra-EU exports. And that this share has grown over five years. France and Italy have held their share. While the UK has dropped from 10% to 8% of total EU goods exports, that is less than a third of Germany's figure, and puts the UK in fifth place behind Germany, France, Italy and the Netherlands, a country, need I remind you, with one quarter the UK's population. No other country has performed as badly as an exporter compared to five years ago, when the UK was almost level with France.

Another headline statistic from the report. Access to bank lending for SMEs. Britain was near the top five years ago, and is now near the bottom, above only Greece, Portugal, Spain and Ireland. The commission's report then looks at each country's strengths and weaknesses. Britain has an excellent business climate, a reasonably well educated work force, scores okay at innovation. But is terrible at productivity. And companies are very bad at buying new equipment.

If the commission's report had been published before Larry Elliot and Dan Atkinson's recent book went to press, I am sure they would have included its findings. The two economics journalists recently published a book about Britain's economic weaknesses*. The summary of what they say is. It is not good enough to have niches of excellence like the BBC, a pop music industry, a few good universities, and a few world class manufacturers. Britain doesn't have the depth of manufacturing capability that Germany has.

Britain hasn't run a current account surplus since 1983, and its successive hopes - North Sea oil, deregulation, finance driven capitalism - have all failed to ensure long lasting means to help Britain pay its way in the world. Their response? Stop feeling good and focus honestly on the whole picture. Britain should "recognise the problem" in the same way as an alcoholic who has hit bottom.

Recognise that, and you can start looking for solutions. It should cease its pretensions to be a world player and take a good look at its strengths and weaknesses. The two authors admit they are better at creating wake up calls than diagnosing how Britain can get ahead. There are no quick fixes, but improved education for the "working class" is part of the recipe. They tentatively suggest two models, that the UK should either sail the high seas of globalisation, like Singapore, a giant free enterprise zone, immensely flexible and competitive and lean. Or become social democratic, an egalitarian, high innovation welfare state, like Sweden. But they conclude that the UK is probably too big for either option.

Not everyone might agree with them, and say Britain has always been good at talking itself down, indeed self deprecation is part of the country's charm - although these are exactly the kind of blithe optimists the two authors target. The optimists, though, could always point to that Legatum report, which puts Britain ahead of Germany in terms of prosperity...

*Going South: Why Britain will have a third world economy by 2014. Larry Elliott and Dan Atkinson Palgrave Macmillan, £14.99



EU competitiveness report 2012

Legatum report

-------------------------
Pelle Neroth -- EU correspondent

Edited: 07 November 2012 at 09:08 AM by View from Brussels Moderator