PRESSURE to deliver quick results is damaging UK business and holding back growth, according to a report published today.
The report, carried out by the former director general of the Institute of Directors (IoD) Sir George Cox, found that short-termism was acting as a blocker to investment, research and staff development.
Cox, whose report was commissioned by the Labour Party, also found that the approach taken by many businesses results in drastic cost-cutting and job losses when revenue growth falls short of expectations.
He said the most important consequence of short-termism was that it hindered the development of the internationally competitive businesses and industries that were essential to the UK’s future economic prosperity.
Cox’s recommendations include extending the governance code so that sufficient long-term incentives are built in to the pay packages of executive and non-executive directors.
He also argues for changes to takeover rules so that investors and businesses can build for the long-term.
“Economic growth needs to become an objective, with strategies to achieve it, not a forecast on which all other decisions are dependent,” he says.
Shadow chancellor Ed Balls said: “It’s vital that we take action to kick-start our flatlining economy, but now is also exactly the right time to make the long-term changes we need to make our economy stronger, more balanced and better able to attract investment and create skilled jobs.
“Where this government’s indecision and short-termism has failed our economy, Labour will grasp the long-term challenge this report sets out.”
It was based on surveys of business leaders, members of the IoD and trades union representatives. More than 90 per cent of IoD members surveyed thought that short-termism was a major or significant impediment to growth and development of UK business.