From the TUC

Is the UK’s slow growth the fault of the Eurozone?

14 Nov 2011, by in Economics

Is the crisis in the Eurozone responsible for the UK’s dismal economic growth? The latest government apologist to repeat this line was Mark Hogan, the Financial Secretary to the Treasury, arguing on the Today programme that the situation on the other side of the Channel “does cast a long shadow over our economy”.

This argument doesn’t stand up to scrutiny. One problem for the Government is that our stagnation began before the Eurozone crisis. Take two sets of data published today. First of all, look at the industrial production data, published by Eurostat:

The chart shows the onset of the Eurozone’s troubles, with production dropping badly in September, but UK production has been stagnant since two months before that. Production in the Eurozone in September was still higher than at the end of 2010, despite the current difficulties; the UK still lags behind that level.

My second piece of new evidence is the OECD’s Composite Leading Indicators, a monthly round-up of data that suggests which way major economies are headed. Everywhere is slowing down, but if you look at the OECD’s charts for the Eurozone and the UK, you’ll see that our peak can claim to have been earlier, and by several months:

We need to get an important point right in this debate. I deny that the Eurozone’s problems are cause of the UK’s current troubles; but that is not the same as saying that they aren’t going to have an effect. Obviously, they are going to limit the scope for export-led recovery and there may well an impact on investors’ confidence in the UK and the solvency of British banks. This is a different matter from our sorry growth record over the past twelve months – and blurring this distinction makes rational arguments more unlikely.

The obvious relief with which Ministers do this tells us a lot about their confidence in the official line.


4 Responses to Is the UK’s slow growth the fault of the Eurozone?

  1. Are European unions and progressive politicians all in it together? | ToUChstone blog: A public policy blog from the TUC
    Nov 15th 2011, 12:45 am

    […] the Eurozone, even though they are categorically wrong to do so, as my colleague Richard Exell has pointed out. Across southern Europe, unions are at odds with Government austerity packages. In Greece, unions […]

  2. More evidence our problems aren’t the fault of the Euro | ToUChstone blog: A public policy blog from the TUC
    Nov 23rd 2011, 3:04 pm

    […] the past couple of weeks, Duncan and yours truly have highlighted evidence that should make government spokespeople think twice about their current […]

  3. More signs UK heading into a recession | Liberal Conspiracy
    Jan 4th 2012, 10:30 am

    […] been careful to make the distinction between blaming the Euro for the collapse of UK output over the past 18 […]