CMA to investigate drivers and blockers of growth following State of Competition report

The Competition and Markets Authority (CMA) has announced its economists will investigate the critical drivers and blockers of growth in upcoming research, following the publication of its third State of Competition report.

Research, to be carried out the CMA’s specialist Microeconomics Unit (MU), will focus on topics including how easily or not new technology spreads across the economy; the impact of upstream market power on economic performance and supply chain resilience; and how competition impacts investment, in line with the government’s recently announced growth mission and Industrial Strategy Green Paper.

The investigation follows publication today (24th October) of the CMA’s third State of Competition report, which assesses how business competition in the UK economy is working. Its findings include that levels of competition have weakened over time, but at a slower rate than in other advanced economies, and markups on products and services have risen 10% over the past 25 years, with increases highest on firms already with higher markups.

The CMA also restated a fall in business dynamism identified in its 2022 report, with larger firms more likely to hold onto their market-leading positions and new entrants becoming less successful in displacing them. Technological advancements were also identified as increasingly important in allowing firms to compete, but higher investment expenditure meant this disproportionately benefited larger firms that could cover the upfront costs.

Sarah Cardell, Chief Executive of the CMA, said:

“At a time of tremendous opportunity for the UK, effective competition has a key role to play in driving economic growth, investment, and innovation. That’s why the CMA is launching the new MU Growth Programme to help inform the government’s growth mission and Industrial Strategy.

“This follows our latest State of Competition Report, which indicates that levels of effective competition in the UK have weakened slightly over time, although by less than in other economies, and that levels of business dynamism have fallen. The report reinforces the important role of effective competition enforcement to drive greater business dynamism and sustained innovation, productivity, and growth across the economy.“

The CMA MU Growth Programme will as a result analyse across issues including in its upcoming research:

• barriers to the spread of new technology;
• the role of competition in investment;
• the strength of competition along supply chains; and
• the impact of pro-growth policy interventions from around the world.