Productivity to improve but profits margins to fall as a result of internet
The internet will lead to productivity boosts and lower profit margins, a member of the Bank of England's Monetary Policy committee has predicted.
Sushil Wadwhani, speaking in London yesterday, described how the internet lowered search costs, reduced barriers to entry and helps shorten the supply chain.
All of these factors helped improve productivity. He said studies even have ‘underestimated’ the improvements the internet might bring.
He said the internet would also reduce inflation, but without bringing about its end.
But he warned that competitive pressure on profit margins could be large and longlasting, although the scale of the impact was uncertain.
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