Michael Lambert: UK Economy - Where Is the Growth Coming from?

Jan 18, 2025 | Every week we hear further bad news about the UK economy. Although other countries are also suffering, the situation in the UK seems far worse, not least as a result of Brexit.

The government under Keir Starmer seems clueless as to how to improve our economy despite talking endlessly about growth. Starmer recently gave a speech about how the UK is to become a worldwide AI superpower alongside China and the USA. It was also announced that he had written to each of the UK regulators asking them to present pro-growth initiatives to Downing St.

Once in power the Labour government agreed to a 15% rise for train drivers who are paid double the UK average. Measures were introduced to increase the minimum wage and make it very difficult to dismiss employees from day one, both of which are likely to deter employment. In the budget Rachel Reeves increased employers' NHI contributions which is a deterrent to employers taking on more staff.

The government has been talking about growth since before they came to power but there has been none. Starmer is now talking about the UK becoming an AI superpower. None of the cabinet has any experience in business and seem clueless as to how to solve our problems. Any solution will take a long time and must prioritise the promotion of small business.

Average UK Household £8,800 a Year Worse Off Than Those in France or Germany

THE GUARDIAN: Thinktank blames inequality and poor productivity as CBI calls for investment policies to fuel growth

The UK’s failure to get serious about inequality and weak growth over the past 15 years has left the average British household £8,800 poorer than its equivalent in five comparable countries, research has found.

A “toxic combination” of poor productivity and a failure to narrow the divide between rich and poor had resulted in a widening prosperity gap with France, Germany, Australia, Canada and the Netherlands, the report from the Resolution Foundation said.

The thinktank said that if the UK matched the average income and inequality levels of those countries, typical household incomes in Britain would be a third higher and those of the poorest households two-fifths greater.

Its chief executive, Torsten Bell, said: “Britain is a rich country, with huge economic and cultural strengths. But those strengths are not being built on with the recent record of low growth leaving Britain trailing behind its peers.

“This forms a toxic combination with the UK’s high inequality, leaving low- and middle-income households far poorer than their counterparts in similar countries. » | Larry Elliott | Wednesday, July 13, 2022

The Observer View on Britain’s Dire Economic Outlook

THE OBSERVER – EDITORIAL: The true cost of Brexit is becoming painfully clearer by the day

The OECD has predicted that the UK economy will not grow at all next year. Photograph: Phil Noble/Reuters
Britain’s growth prospects are the gloomiest of all developed nations. The OECD predicted last week that the UK economy would not grow at all next year, the worst outlook for any OECD nation. This follows warnings in April from the IMF that the UK will experience the worst growth out of the G7 nations in 2023. After a decade of stagnant wages, it seems Britons need to resign themselves to the fact that the buoyant growth of the 2000s is but a distant memory.

Every country has suffered the shock of the pandemic, followed by the spike in oil and wheat prices triggered by Russia’s illegal war in Ukraine. But other developed economies have proved more resilient, enjoying export-driven recoveries in the wake of Covid. Here in Britain, the economic malaise left exposed by the 2008 financial crisis is long term and structural.

This crisis was supposed to prompt a big economic rethink: a reckoning with Britain’s addiction to growth fuelled by rising levels of consumer debt enabled by rising house prices. The then shadow chancellor George Osborne pledged to rebalance the economy away from debt-driven growth to more productive development, driven by business investment and exports, underpinned with an expansion of the UK’s manufacturing base and a reduction in the huge regional inequalities between the south-east and the rest of the country. » | Editorial | Sunday, June 12, 2022

With Covid-19 Under Control, China’s Economy Surges Ahead

THE NEW YORK TIMES: Exports jumped and local governments engaged in a binge of debt-fueled construction projects. Even consumer spending is finally recovering.

BEIJING — As most of the world still struggles with the coronavirus pandemic, China is showing once again that a fast economic rebound is possible when the virus is brought firmly under control.

The Chinese economy surged 4.9 percent in the July-to-September quarter compared with the same months last year, the country’s National Bureau of Statistics announced on Monday. The robust performance brings China almost back up to the roughly 6 percent pace of growth that it was reporting before the pandemic. » | Keith Bradsher | Published, Sunday, October 18, 2020 and Updated Monday, October 19, 2020

Trump Up in Polls; Who Benefits from Economic Growth?

GDP growth up, stock market up, will the economic expansion continue and who are the winners? Dean Baker and Randall Wray join host Paul Jay

Prepare for a Slowdown: World Bank Says Tide Is Turning for Global Growth

GOP Is Walking Away from Trump: Stuart Varney

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Nobel-winning Economist: ‘Let Entrepreneurs Tap into the Unknown and Innovate More’

Reasons to Be Cheerful: World Bank Forecasts Growth Picking Up in 2017

Bank Targeted Growth for Rate Decisions, Ben Broadbent Says

THE DAILY TELEGRAPH: A Bank of England policymaker has admitted the widely-held belief that interest rates have been set in response to changes in growth rather than the official inflation mandate.

Ben Broadbent, an external member of the Monetary Policy Committee (MPC), made the revelation as part of an attempt to explain the Bank’s new 7pc unemployment target, which he claimed was now more relevant than growth due to productivity bottlenecks in the economy.

Economists have long suspected the Bank was targeting growth because inflation has been well above the 2pc target for the bulk of the past five years. The Bank has always been careful to stress its inflation-fighting credentials, though.

In a speech to the London Business School, Mr Broadbent said the statistical evidence proved the MPC had used growth throughout the past decade as a proxy for the future direction of inflation.

“UK monetary policy responded sensitively, immediately and more or less uniquely to actual growth in output,” he said. “The reason, I believe, is that every acceleration in output was thought to represent a rise in output gap, signalling higher inflation risks, every drop in growth the opposite.”

With the economy now suffering from a complex productivity problem, he argued that unemployment is a better gauge of how rapidly inflation will pick up. Read on and comment » | Philip Aldrick, Economics Editor | Monday, September 23, 2013

Growth in Germany and France Ends Euro Recession

THE INDEPENDENT: 17 countries that use euro saw collective economic output grow by 0.3 per cent

Germany and France finally powered the eurozone out of its longest-ever recession between April and June, official figures showed today.

The stronger-than-expected 0.3% growth ends six-successive quarters of economic contraction for the single-currency bloc and also heralds better news for the UK’s exporters, which send around 40% of their goods to European markets.

The recovery was led by the eurozone’s two biggest economies as powerhouse Germany managed 0.7% growth and France cheered markets with an unexpectedly strong 0.5% bounce-back from a mild recession of its own. This was France’s strongest advance for two years. » | Russell Lynch | Wednesday, August 14, 2013

Debt Crisis: IMF Calls on Coalition to Draw Up 'Plan B'
THE DAILY TELEGRAPH: Britain’s recovery has stalled and the Government must be prepared to relax austerity to pump life into the ailing economy, the International Monetary Fund has warned.

The IMF said that post-crisis repair to the ravaged economy would take longer than expected, meaning extra effort to boost growth could take priority over deficit reduction should the outlook worsen.

It said the 2013 Budget would be an ideal time for the Government to consider further action, should policies already in place fail to make an impact.

"If growth does not take off and unemployment fails to recede even after substantial further monetary stimulus and strong credit easing measures have been given time to work, the policy response should include a further slowing of fiscal consolidation," said Ajai Chopra, the IMF’s deputy director of the European department.

"[The Budget] would be the natural time to look at the state of the economy and policy responses," he said. » | Angela Monaghan, Economics Correspondent | Thursday, July 19, 2012

IMF report on UK
My comment:

Austerity, austerity, austerity is not the answer to a severe recession, depression. What the Chancellor is doing with all this austerity is slamming the breaks on really hard when in actual fact the pump needs to be primed.

Whilst it is always prudent for a country to get its finances in order, the time for doing this is when the going is good. It is when the going is good that we save for that proverbial 'rainy day'. A family doesn't save money when the rainy day has come; rather, it saves for the rainy day when circumstances allow. So it should be for government. The coffers should be being filled when the economy is booming. What this government is doing is turning this wisdom on its head. The result will be misery for the people. Witness what is going on in Greece – austerity as we have, but in extremis.

All this austerity should therefore be tempered by a solid growth strategy. Only when the economy starts to grow again, only when there is at least a modicum of recovery can we hope to shorten the dole queues, can we hope to relieve people's misery, can we hope to encourage people to spend again. For it is only when people spend that demand increases; and only when demand increases will the economy start moving again. – © Mark

This comment also appears here.

Diamond Jubilee Marks 60 Years of British Economic Potential Squandered

THE GUARDIAN: Britain has got richer in the past six decades, but other countries have got richer faster and enjoy a more stable economy

Hard though it is now to credit it, when the Queen came to the throne 60 years ago, the UK was the third-biggest economy in the world after the US and the Soviet Union. With Germany recovering from the physical damage caused by the second world war, Britain was Europe's powerhouse.

Since then there have been booms and busts. Two long periods of growth have culminated in deep and painful recessions. Governments of both left and right have tried to modernise and reinvigorate the economy: the three-day week, the winter of discontent, Black Wednesday and the (unfinished) great recession of the past five years have shown how difficult this has been.

Throughout it all, Britain has got richer. While there are surveys questioning whether we are happier on the occasion of the Queen's diamond jubilee than we were when she came to the throne, living standards have more than tripled since 1952.

The consumer luxuries of the age when Harold Macmillan said we had never had it so good have become the necessities of today. Nor is it simply in material terms that Britain is better off. Today's babies can expect to live for about 10 years longer than the baby boomers of six decades ago. They will be fitter and healthier as well.

Yet, the real story of the past 60 years has been of potential squandered. Britain has grown richer, but other countries have grown richer faster. What's more, the economy has become more unbalanced and its foundations shakier. » | Larry Elliott | Sunday, June 03, 2012

Eurozone Crisis 'Threat' to Global Economy
The eurozone financial crisis could threaten the global economy, according to Organisation for Economic Development and Co-operation. The 17-nation eurozone will see its economies shrink by 0.1 per cent, before rebounding to 0.9 per cent next year, the Paris-based organisation said in its latest report released on Tuesday. Nick Spicer reports from Berlin.

Bank of England Cuts Growth Forecasts: Sir Mervyn King's Speech In Full
The Bank of England has cut its growth forecasts and warned in its May Inflation Report that inflation will stay high for longer than it previously thought. Here is Sir Mervyn King's speech in full.

Read the speech in full here | Wednesday, May 16, 2012

Stronger than Expected Growth: German Economy Defies Crisis
SPIEGEL ONLINE INTERNATIONAL: Despite the European debt crisis, the German economy chalked up impressive growth during the third quarter. With economies stagnating or contracting elsewhere in the euro zone, however, economists are warning output will likely cool down this winter, with the possibility of a mild recession.

The debt crisis has been a burden for almost all of Europe, but Germany continues to dodge the worst economic side-effects. Gross domestic product jumped considerably in the country between July and September, growing by 0.5 percent over the previous quarter. On Tuesday, the German Federal Statistical Office released its first estimate showing that GDP grew by 2.6 percent compared with the same period the previous year.

The Statistical Office has also revised its figures for spring, indicating that growth was stronger than previously assumed. During the period, GDP grew by 0.3 percent instead of the 0.1 percent previously assumed. » | dsl -- with wires | Tuesday, November 15, 2011

US Fed Cuts Growth Forecasts for 2012

THE DAILY TELEGRAPH: The Federal Reserve said it now expects US growth to be weaker and unemployment higher than it thought in its last set of forecasts, as the central bank left the door open to fresh measures to help the world's biggest economy.

As expected, the Fed held interest rates at 0pc to 0.5pc, but cut its economic growth forecasts for 2012 to between 2.5pc and 2.9pc, down from 3.3pc to 3.7pc.

It also took a more gloomy view on jobs, predicting unemployment will stick at 8.5pc to 8.7pc next year against the 7.8pc to 8.2pc range it had forecast.

While acknowledging the economy had shown improvement in the third quarter, Fed chairman Ben Bernanke struck a downbeat note in his last press conference of the year. Read on and comment » | Richard Blackden | Thursday, November 03, 2011

George Osborne's Recovery Plans Receive Double Boost as UK Rating Upgraded
THE DAILY TELEGRAPH: George Osborne's recovery plans have received a welcome boost with better than expected third quarter growth figures and a crucial upgrade in the rating of the UK economy.



Gross domestic product (GDP) grew by 0.8 per cent between July and September - less than the 1.2 per cent surge in the previous three months, but double the growth predicted by most economists.

Growth over the past six months has now hit 2 per cent, which is the fastest pace of expansion seen over two consecutive quarters for 10 years.

The data eases fears of a double dip recession and will reinforce government hopes that the private sector will pick up the slack created in the economy by mammoth public spending cuts.

Ratings agency Standard & Poor's added to the cheer by revising its outlook on the UK to stable from negative and confirming the UK's AAA rating. >>> | Tuesday, October 26, 2010

THE DAILY TELEGRAPH: Banks should be broken up, Bank of England Governor Mervyn King warns: Mervyn King, Governor of the Bank of England, has thrown his weight behind breaking up the banks as part of wider reforms to protect the taxpayer from another financial industry meltdown. >>> Philip Aldrick, Economics Editor | Monday, October 25, 2010

German Economy Surges Ahead at Record Pace
THE GUARDIAN: Germany's 2.2% growth helps eurozone to outpace US / Every eurozone country except Greece now out of recession / Euro strengthens, with potential threat to Europe's competitiveness

Germany has seen strong demand for exports along with a recovery in construction drive growth higher than market expectations. Photograph: The Guardian
The German economy grew at its fastest pace in the second quarter since the country was reunified two decades ago, fuelling the strongest growth in the eurozone in more than two years.

Europe's largest economy powered ahead between April and June, growing by 2.2%, thanks to a recovery in construction and strong foreign demand for German goods, the federal statistical office, Destatis, reported today. This was well above market expectations of 1.4% growth. Growth in the first quarter was revised higher to 0.5% from 0.2%.

Germany's stellar performance helped the 16-member eurozone grow by 1% in the second quarter, the strongest growth rate since the first quarter of 2008 and a strong improvement on the 0.2% recorded for the first three months of this year. No detail is available yet, but exports, investments and a backlog of work in the construction sector after a harsh winter are expected to have been the main factors driving growth.

"After three difficult months of eurozone battering, today's numbers will help to heal the eurozone's wounds. For the first time since the second quarter of 2009, the eurozone outpaced the US economy," said Carsten Brzeski at ING.

America grew by around 0.6% in the second quarter of 2010, slower than earlier in the year.

Every eurozone country except Greece has now come out of recession. Only Greece experienced a sharp drop of 1.5%. The best performers were led by Germany, the Netherlands (0.9%), Austria (0.9%), Belgium (0.7%) and France (0.6%), while Spain (0.2%) and Portugal (0.2%) are still lagging behind. >>> Julia Kollewe | Friday, August 13, 2010

Eurozone GDP: What the Economists Say
THE GUARDIAN: Germany reported an impressive 2.2% growth in the second quarter today, the strongest since the country was reunified two decades ago. This helped fuel growth in the 16-member eurozone, which expanded by 1%, compared with just 0.2% in the first three months of the year. France expanded by 0.6% while Spain recorded lacklustre growth of 0.2%. Here is what economists made of today's figures. >>> | Friday, August 13, 2010

”Toxic Mix” for British Economy
THE SUNDAY TIMES: BUSINESS is warning of a “toxic mix” for Britain’s economy of sharply weaker growth and profits alongside powerful inflationary pressures. This poses a growing dilemma for the Bank of England, which held off cutting interest rates last week but is widely expected to cut next month.

According to Ernst & Young, profit warnings from UK-quoted companies have hit their highest level since the final quarter of 2001, when the economy was rocked by the fallout from the September 11 terrorist attacks on America.

Meanwhile, this week’s British Chambers of Commerce (BCC) quarterly economic survey is said by insiders to be “flashing red”. Output, orders and expectations are all down sharply, except for firms’ expectations of price rises, which are at a record high.

A YouGov poll of more than 2,100 voters for today’s Sunday Times shows that people are gloomy about economic prospects, with 34% expecting a slowdown, 21% no growth at all, and 22% a recession. Firms face toxic mix of rising prices and falling profits >>> By David Smith

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