Sajid Javid claimed in his speech this week that the “fundamentals of the UK economy remain strong.” As the latest GDP figures from the ONS show us narrowly avoiding a recession, we explain why the Chancellor is wrong:
Under the Tories, Britain is facing a productivity crisis. Productivity growth has averaged 0.3% since crisis, compared to the pre-crisis average of 2%. The ONS estimates this has cost the average worker £5,000 a year and puts UK productivity 16% below the G7 average.
In recent months, the crisis has only got worse. Latest ONS figures show productivity starting to fall, following two consecutive quarters of zero growth.
The productivity crisis might sound obscure and wonkish, but it has had a devastating impact on people’s living standards.
One of the most reliable way to boost people’s wages is to boost productivity, and a decade of stagnant productivity has led to a decade of stagnant wages.
In real terms, average weekly wages are remarkably still below their pre-crisis peak. This extended period of stagnation was described by the respected Institute for Fiscal Studies as “unprecedented” – and means this is the worst decade for wages since the 19th century.
Underlying the productivity crisis and wage stagnation is a chronic lack of investment.
Analysis by the Labour Party of World Bank figures shows the scale of the problem. The UK was ranked 27th out of 28 in the EU for investment as a proportion of GDP in 2018, coming ahead only of Greece.
Again, the situation is only getting worse. The Tories’ bungling of Brexit means business investment has fallen for five of the last six quarters.
The Chancellor boasted of “nine consecutive years of economic growth”, but failed to mention that growth has massively under-performed pre-crisis trends.
As a result, the recovery from the crisis has been the slowest for over a 100 years, with this under-performance costing the economy £300 billion in lost growth.
The Chancellor also cherry-picked figures to give a misleading picture of our performance by international standards. While the IMF believes the UK will grow faster than a few select countries next year, it also forecasts growth well below the average for advanced economies. This follows a poor 2018, where the UK ranked 28th out of 34 for growth in the OECD.
Again, the latest data shows the problem is only worsening, as the UK only narrowly avoided recession in the third quarter of this year and the UK registered the slowest annual growth rate in a decade.