The British decline
Britain’s economy has come to somewhat of a standstill in recent years, its growth stalling and bucking under the weight of seven Prime Ministers since the 2008 financial crisis — just under half of them being in a single year. This flatlining, where wages are stagnant and inflation remains stubbornly high, tells a story quite different to the British government’s narrative that things are improving following the Tories’ fourteen years of foolishness; instead, it describes an economy still almost constantly propped up by temporary fiscal injections, burdened by structural weaknesses that no one of any importance appears to be willing (or prepared) to confront.
In 2024, the growth of the UK’s GDP hovered around 0.1%. There were brief spurts of activity, driven largely by energy price fluctuations, government spending and other such short-term factors, but as a whole? Shockingly little to show for a year of a country at work.
France’s economy saw a 0.8% rise in inflation, but a 0.1% decrease in overall growth; Germany’s inflation rate increased by 2.3%, but the economy decreased by 0.2%; while Italy’s GDP increased by just about 0.1%. The United States Department of Commerce released its October-December 2024 GDP to show a 2.3% increase, while India, the country with the single highest growth globally, saw its economy grow by 6.2% in the same quarter. It was the fastest-growing major economy during that period, driven by increased government and consumer spending (take notes, Conservatives: trickle-down economics doesn’t work!). Outside of major economies, Guyana is projected to have the highest GDP growth rate, hovering somewhere around 43.8% as a result of its rapidly growing oil industry — exceptional even by emerging market standards.
Inflation, once the headline threat, has eased slightly but still stands above the target. Core inflation — which strips out volatile energy and food prices — remains sticky. Interest rates, boosted to combat the inflation we appear to find ourselves at battle with, have done little more than inflict pain on both the individual and organisation alike. Mortgage rates have soared: an average two-year fixed mortgage rate has not only hit the 6% mark but increased beyond it. The Bank of England’s balancing act between controlling inflation and avoiding a recession has begun to walk a line becoming increasingly thinner. Soon, the line will simply vanish from existence beneath the feet of the British people, plunging them into whatever waits below the ice.
The roots of this malaise are not difficult to trace: Brexit; Covid, and Truss’ foolish ‘trickle-down economics’ have meant that trade friction has throttled Britain’s exports and added layers of complexity — and, therefore, cost — to supply chains. Investment in businesses has slumped, down 5% to pre-Brexit levels.
Fiscal policy has been equally incoherent: public services remain stretched to the breaking point — the NHS, education services, and local councils all crying out in unison for funds. Investment in infrastructure has ground to a halt: just this morning a trip that was supposed to take twenty-five minutes at most became an hour, being faster to walk than to take the bus. Debt interest payments, too, are projected by Pantheon Macroeconomics to rise to over £120 billion for the current financial year, being £35 billion higher than previously forecast, and $54 billion more than the previous year.
And yet, despite all this, Labour — despite leading in the polls — and the rest of the political class appear paralysed — at least, to the extent that they offer little in the way of radical solutions. Rachel Reeves, thus far as Chancellor, ruled out significant tax increases or borrowing for investment, promising instead to ‘balance the books,’ but this approach sounds eerily similar to the mindset of austerity that choked growth in the 2010s.
The result is a policy vacuum, in which the UK drifts, lacking any coherent economic strategy, left entirely in the dust of other nations: the US has embraced industrial policy — I’d point to the Inflation Reduction Act (IRA — a truly terrible name choice) of 2022 as an example — while the EU invests in greener infrastructure and a digital transformation. Britain, in contrast, appears content simply to muddle through in the hope that the global economy will recover and drag it along for the ride.
This is not simply a downturn — it’s a long-term decline. The UK’s productivity problem dates back to the 2008 financial crisis, with successive governments failing to address it. Investment in infrastructure, research and education remains truly pitiful compared to our fellow countries and competitors. So, in short, Britain’s economic decline is inevitable if we continue on the same path. If.
The country still possesses enormous structural advantages; a highly educated workforce, a strong financial sector, and deep cultural and trade links. But they are squandered by political timidity and a refusal to confront the difficult choices that are necessary for the long-term, sustained growth of the UK’s economy. If this government and its successors cannot muster the courage to innovate, Britain’s stagnation will become its new normal.
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Good day — Simon
