At this rate, Sunak may even repent of Brexit before Starmer does
F or many years, when asked to speak about the British economy, I used to point out that the influence of technological progress on productivity allowed an average growth rate of 2.25% to 2.5% a year. This meant that living standards could double every 25 years or so. Political battles raged over the sharing of the growth, but on the whole most people gained to some extent.
No longer! Beneath all the fanciful predictions emanating from this tired government come the hard facts from the independent Office for Budget Responsibility (OBR), the Resolution Foundation and the Organisation for Economic Co-operation and Development. A collapse of investment, with more and more international corporations deciding Britain is no longer the place to invest for a foothold in the European market. And dire forecasts of a 6% fall in living standards in the next two years. Some platform for an election, eh?
After growing quite fast in the 10 years to the 2008 financial crisis – assisted not least by the opportunities afforded by our membership of the European single market – and then being hit by a decade of needless and damaging austerity, investment, which is the seedcorn of economic growth, came to a halt. First it was the policy of austerity itself that savaged the public sector investment on which the private sector and higher living standards depend. Then it was Brexit. Productivity? The OBRthinks Brexit has knocked 4% a year off the nation’s productive potential; my old friend Jagjit Chadha, director of the National Institute of Economic and Social Research, says it puts the loss at nearer 5.5%.
Investment has stagnated, and hence growth has also stagnated. We have not been helped by the blow to our terms of trade – the fall in the
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