Britain has a growth problem. This is not unique. The fitted trend growth of UK GDP per head between 2008 and 2023 was a miserable 0.7 per cent a year. But trend growth was still lower in France and Italy. Even in the US growth of GDP per head was only 1.5 per cent. For a host of reasons, including rising dependency ratios, adverse shocks and weak productivity trends, economic growth has tended to be feeble in the UK’s peer countries. This strongly suggests that raising growth sharply in the UK will be hard.
Yet achieving just this is also vital as Rachel Reeves, the UK’s chancellor of the exchequer, is well aware. In her speech on the topic last week, she argued that “without economic growth, we cannot improve the lives of ordinary working people”. In theory, the government could focus on redistribution instead. In practice, that alternative has already hit the political and economic buffers. In the UK, growth is the priority.
