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Goldman: These are UK’s two long-term weaknesses

Construction on the Crossrail project in London
Oli Scarff | Getty Images

The U.K. is in danger of being left behind when it comes to infrastructure investment and education over the next 10 years, according to Goldman Sachs' Chief U.K. Economist Kevin Daly, increasing the pressure on the government as it prepares to deliver a key economic policy package this week.

Speaking at a presentation about the U.K. economy on Tuesday, Daly said: "If I think of the relative strengths and weaknesses of the U.K. in the long term, I would argue that the U.K.'s two relative weaknesses are infrastructure and education."

"Relative to its peers, its infrastructure is relatively poor; its education is relatively poor."

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His comments come on the same day that the Organization for Economic Co-operation and Development (OECD) published the results of its most recent international study of students, showing that the U.K. ranked just 26th out of 65 countries for maths.

Meanwhile, analysis by the Financial Times highlighted "slow, if not minimal" progress on many of the country's infrastructure schemes.

In the OECD report, Britain failed to move up the rankings from the 2009 Programme for International Student Assessment (Pisa), and did not make the top 20 in maths, literacy or science.

By contrast, students in Asia stormed ahead, with Shanghai, Singapore and Hong Kong taking the top three spots. (China is represented by some of its cities, rather than as a country.)

The Confederation of British Industry (CBI) business organization said the PISA results should act as a "wake-up call."

"High-performing schools are the best way to support economic growth and greater opportunity," Katja Hall, CBI chief policy director, said in a statement. "No issue matters more to the U.K. economy over the long term than the quality of our education system."

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Britain's Education Minister Michael Gove responded on Tuesday, saying the results demonstrated the need to press ahead with educational reform.

"For all the well-intentioned efforts of past governments, we are still falling further behind the best-performing school systems in the world," he said in a statement to the House of Commons.

"(It) matters because business is more mobile than ever, and employers are more determined than ever to seek out the best qualified workers. Global economic pressures, far from leading to a race to the bottom are driving all nations to pursue educational excellence more energetically than ever before."

'Slow progress'

Also on Tuesday, analysis by the Financial Times (FT) revealed that U.K.'s coalition government's key infrastructure schemes had showed little progress.

In November 2011, the coalition outlined 40 major infrastructure projects which it said were a key part of its growth strategy. These included schemes covering road construction and improvements, new public transport projects such as Crossrail and Thamslink, and energy infrastructure developments.

But only a handful of these projects have been completed, according to the FT, with many of the 40 stalled or a long way off construction.

The Treasury was not available for comment on this issue when contacted by CNBC, but a Treasury spokesman told the FT that some of the major projects – such as Crossrail - would "obviously" take many years to complete.

In a letter to U.K. Chancellor George Osborne ahead of his bi-annual "state of the economy" address – known as the Autumn Statement – on Thursday, the CBI's Director-General John Cridland called for a more "relentless" focus on infrastructure investment.

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He said more action on infrastructure was needed in the energy and aviation sectors in particular, and called for reforms to major infrastructure planning to "really push investment intentions in the private sector over the edge."


But despite these long-term weaknesses, Goldman expects the revival in economic activity in the U.K. to continue following 2013's "sharp turnaround."

In its U.K. economic outlook report, Daly said a strong banking system would be critical to the country's recovery.

"In addition to providing short-term support to growth, we have argued that rectifying the problems with credit supply in the U.K. will also help to resolve some of the medium-term problems that the economy has faced (such as weak productivity, persistent imbalances and relatively high inflation)," he said.

But he warned that some moderation in U.K. growth was likely, given an expected appreciation in sterling (the decline in the pound's value over 2013 helped spur the recovery, according to Daly) and as "pent-up spending" by households and corporates tailed off.

Goldman Sachs expects GDP in the U.K. to grow by 1.4 percent for 2013, before accelerating to expand by 2.7 percent in both 2014 and 2015, and 3 percent in 2016.

By contrast, economic forecasts by Britain's Office for Budget Responsibility (OBR) are significantly lower. Many economists expect the independent body to revise its expectations up following a string of better-than-expected economic data for the U.K. when it publishes its latest report alongside Thursday's autumn statement.

In March, the OBR forecast growth of 0.6 percent in 2013 and 1.8 percent next year, before expanding by 2.3 percent in 2015 and 2.7 percent in 2016.

In the third-quarter of this year, the U.K.'s economy grew by 0.8 percent from the second quarter, according to official data published in October, marking its fastest growth since 2010.

By CNBC's Katrina Bishop. Follow her on Twitter @KatrinaBishop and Google