In recent months the Government has been talking a great deal about a 'global race'. Much of their economic policy is now justified by saying they are 'equipping Britain' for this race. So, if there is a 'global race' it seems fair to ask how the UK is doing?
This series of posts on Touchstone will examine Britain's performance against our major international peers. Follow us as we keep score on the 'global race'.
Richard Exell
Figures from the US Bureau of Labor Statistics help us compare inflation rates across the major developed economies. Looking at the inflation figures for the twelve months to March (the most recent figures), the UK has the highest of any G7 economy. The Organisation for Economic Co-operation and Development’s most recent data also has the UK’s inflation as the highest in the G7.
Duncan Weldon
Figures from the ONS today show that between 2005 and 2011, UK disposable income per head dropped from being the 5th highest in the developed world to 12th.
Such figures are part of a larger picture emerging about the recent performance of the UK. In broad strokes the big picture of the UK since 2008 has been of a large fall in output, followed by a long period of stagnation that may finally be giving way to an incredibly weak recovery. We are, by most measures, underperforming both out own historical experience and the experience of other large developed economies.
Duncan Weldon
The past two weeks have provided some good and some bad news on the UK economy. On the one hand GDP data for Q1 2013 was better than expected, whilst on the other GDP per capita figures suggested that the hole we are currently in is much bigger than previously thought.
GDP per capita measures economic output per person. In many ways this is the most sensible way to measure growth over the medium term and the best way to compare growth across nations.
As can be seen in the table below the UK’s performance is abysmal.
Duncan Weldon
Today’s GDP figures were certainly better than expected, with growth of +0.3% topping the estimates of most economists. But noting that something was better than expected does not mean it qualifies as ‘good news’.
The fact that avoiding an unprecedented ‘triple dip’ is celebrated as a sign of success suggests that expectations really are on the floor. This is like coming last in a race and announcing ‘well, at least I didn’t fall over and break my leg’.
Growth of +0.3% takes the economy back to where it was 6 months ago, before the fall in Q4 2012. We have had no growth in the past 6 months, only 0.4% growth in the past 18 months and just 1.8% in the 11 quarters since George Osborne’s first Budget.
Richard Exell
Today, Eurostat published balance of payments figures for the third quarter of 2012. The UK has run a balance of payments deficit for fifteen years, which is especially worrying – long-term deficits like this tend to be a signal of weakening competitiveness, of a preference for foreign producers and service providers over domestic alternatives.
The Eurostat figures cover 6 of the G7 countries (unfortunately they don’t include Canada) and the UK came next to bottom, well below the EU average and substantially below the Euro Zone.
Duncan Weldon
International Labour Organisation data shows that over the course of 2007-2011 British workers suffered the largest falls in real wages (wages after taking into account price rises) of any G7 economy. Whilst workers in many countries saw their real terms pay rise, real wages fell heavily in the UK adding to an unprecedented squeeze in living standards.
Duncan Weldon
Whilst industrial production in the UK has actually fallen since mid 2010, it has raced ahead in Germany, the US and Canada. Overall the UK is currently in 5th place amongst the G7 and well behind the leading countries.
Duncan Weldon
Exports are perhaps the simplest way to measure performance in the ‘global race’ and the UK has been doing extremely badly over the past two years. The Government like to blame the international economy for all our current woes but in reality many of our problems (government austerity, the squeeze on living standards) are domestic.
Duncan Weldon
The most straight forward way to measure our progress in the global race is to look at growth. The info-graphic above compares our performance to those of the other major economies in the G7 group since the Budget of June 2010.
