| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 Asia Economy

Finfacts changes from 2015


How to use our RSS feed

Follow Finfacts on Twitter

Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.


Finfacts is Ireland's leading business information site and you are in its business news section.


Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Global Cost of Living

Irish Tax - Income/Corporate




Content Management by interactivetools.com.

News : UK Economy Last Updated: Mar 26, 2015 - 7:32 AM

UK "underlying growth has stopped"
By Michael Hennigan, Finfacts founder and editor
Mar 20, 2015 - 7:33 AM

Email this article
 Printer friendly page

UK "underlying growth has stopped" according to a commentary on this week's UK Budget by the chief economics commentator of the Financial Times.

Martin Wolf writes today that both the government and the opposition Labour party have not recognised that the financial crisis both revealed and caused structural weaknesses in the British economy.

Wolf says that the economy is “ex-growth” — underlying growth has stopped and in this context the goal of George Osborne, the chancellor “'for Britain to become the most prosperous major economy in the world' is absurd."

Real GDP (gross domestic product) per head at the end of 2014 was similar as at the end of 2006; real GDP per head at the end of 2014 was about 16% below pre-crisis trend growth and GDP per hour was about 15% below the pre-crisis trend.

He said: "This productivity collapse is why employment has been so buoyant. But now that unemployment has fallen to 5.5%, nearly all future growth depends on a productivity resurgence."

The UK “grew faster than any other major advanced economy in the world last year [. . .] and seven times faster than France,” said George Osborne on Wednesday, adding that, between 2010 and 2013, more jobs were created in Yorkshire than on the other side of the English Channel.

The jobless rate in France was 10.2% in 2014 — almost twice the UK rate. GDP in the UK grew by 2.6% in 2014. In France it was a puny 0.4%.

The FT says data show that in 2013, output per worker in France was 13% higher than in the UK. However, as the British work longer hours than the French, on a comparison of GDP per hour, the difference surges to 27%.

Over the past two decades, French workers have, on average, have an output per head 20% higher than their UK colleagues. In 2008-2013 productivity was stagnant in the UK but rose by about 3% in France.

The Office for Budget Responsibility (OBR), the government's independent forecaster, comments in its report for the budget: "productivity fell on an hourly basis in the final quarter, falling short of our forecast once again." There was a rise of 0.2% in 2014.

It added: "productivity growth will pick up slowly to more normal rates, but that remains the most important and uncertain judgement in our forecast. It drives our expectation that real wages (specifically our estimate of the ‘real consumption wage’) will return to their pre-crisis peak by late 2018 — sooner than we expected in December, thanks in part to the boost to real wages associated with lower oil prices."

In effect the OBR experts are keeping their fingers crossed: "since it is difficult to explain the abrupt fall and persistent weakness of productivity in recent years, it is also hard to judge when or if productivity growth will return to its historical average."

Prof David Blanchflower, a former member of the Bank of England's Monetary Policy Committee wrote last January: "It is hard to see how productivity would rise in the face of spending cuts that Mr Osborne outlined in his Road to Wigan Pier Autumn Statement, cuts which are unprecedented in living memory. The OBR said “total public spending is now projected to fall to 35.2 % of GDP by 2019-20, taking it below the previous post-war lows reached in 1957-8 and 1999-2000 to what would probably be its lowest level in 80 years”. More of the same won’t fix it. [ ] Productivity measured in terms of output per hour by sector and the story is broadly the same for economy as a whole. Manufacturing output per hour has increased in each of the latest four quarters and was 5.2 % higher than a year earlier in Q3, the fastest rate of increase since 2010. But it is still only up 2 % since 2011.

Services productivity has remained broadly flat for the last three years. So there is a glimmer of hope of a pick-up in manufacturing but essentially none in the much larger service sector."

On Wednesday, George Osborne drew back a little from the Orwellian scenario but there are no clear answers to what the Bank of England in a paper in 2014 called The UK productivity puzzle.

The authors concluded: "Factors related to the nature of the financial crisis are likely to be having a persistent impact on the level of productivity — but there remains considerable uncertainty around any interpretation of the puzzle."

"There are some who advise us to abandon our plan and pursue the French approach", said George Osborne in his Budget speech. But is the French economy performing that badly compared with the UK? Business Editor Sarah Gordon looks at France's productivity results with Executive Editor Hugh Carnegy.

Related Articles

© Copyright 2015 by Finfacts.ie

Top of Page

UK Economy
Latest Headlines
UK in 28th rank of 30 advanced OECD nations for health resourcing: Economist Intelligence Unit
Business on a Shoestring: Keeping startup costs low in UK and Ireland
UK "underlying growth has stopped"
41,000 London properties held by foreign companies - 90% in tax havens
UK GDP rose 2.6% in 2014 up from 1.7% in 2013
Northern Ireland private economy contracted in December 2014
Northern Ireland may have a 12.5% corporation tax rate from 2017
UK moves ahead on 'Google tax' despite criticism
PwC charged with "selling tax avoidance on an industrial scale"; indulging in "scams"
Income inequality damages economies; Rich-poor gap highest in 30 years
Cameron warns of risk of another global recession
Only 80,000 of 1.1m UK jobs added since 2008 were full-time employee positions
UK added 112,000 jobs in third quarter; Pay inches above inflation - first time in 5 years
Germany and UK agree to restrict 'patent box' tax incentives to local R&D
German retailer Aldi to create 35,000 new jobs in UK by 2022
UK GDP growth slowed in the three months to September
UK retail sales fell in September; Tesco, Debenhams, Foxtons report market stress
UK faces more austerity and less chance of tax cuts
Globalization, the underclass and the need for a new model - Part 2
Northern Ireland PMI shows sharp increase in activity
UK economic growth revised up - above pre-recession level
London world’s most expensive city for companies to locate employees
UK retail sales in August best performance since January
UK economy added more net jobs in past 4 years than rest of the EU combined
UK to announce stiffer penalties for offshore tax evaders
UK economy since launch of the euro in 1999
IMF says British pound overvalued
UK profit warnings reach highest first half total since 2011
UK GDP up 3.1% in 12 months to end Q2 2014; Economy overtakes pre-crisis 2008 peak
Wealthy foreign students overtake finance professionals as renters in prime Central London areas
UK attracts most inward investment projects since records began in 1980s
Trends in UK and US part-time and self employment since 2008
UK labour participation at 73% - highest in decade; US at 63% - lowest since 1978
More than 20,000 client names of Jersey tax haven bank leaked
UK house prices overtook their 2007 peak in Q2 2014
UK recovery continues at robust pace
UK employment rose again at a record pace in the three months to April
UK tax revenues rose to record in 2013/2014 with help from tax dodgers
Overseas visits to London in 2013, up 43.5% in 10 years
UK economy grew 0.8% in Q1 2014; Almost back to 2008 peak