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in GDP following Q3’s drop of 0.1%. We ask Nick Hood, Senior Business Adviser, Opus Business Advisory Group (https://www.opusllp.com) what lies behind our poor growth record and what the prospects are for a swift
recovery.
“This recession, spun by government sources as no more than ‘technical’, is undoubtedly shallower and far less dramatic than the various economic corrections of the post WW2 era. That doesn’t make it any less worrying or the path back to growth necessarily an easy one. We are a long way below the long-term, 30-year trend of an average annual growth rate of 2.1% as we slither around in the murky depths of GDP charts.”
“An aspect of the growth statistics given little media coverage was the starker reality that on a per capita basis, GDP fell by a higher figure of 0.7% for 2023 as a whole and dropped in every quarter. Our GDP per capita is now 1.1% lower than pre-pandemic in Q3 2019, whilst the EU’s is 2.7% higher and in the USA it is 6% greater. Hiking GDP by growing the population leaves nobody better off, not that we’re even achieving that.”
“There’s no doubt that like so many other economies around the world, we have been battered by a succession of major shocks, starting with the pandemic, and progressing through the supply chain disruption and energy price hikes of the Ukraine war to the current cocktail of high and potentially stubborn inflation, soaring interest rates and labour market issues. The trouble is we are well behind our competitors among developed nations in countering these problems.”
“It’s universally accepted that we have a huge productivity problem, largely caused by decades of tragically low levels of business investment. In the past, cheap labour here in the UK or at the other end of our globalized supply chains masked this fundamental flaw in our economy. Our determination to curb immigration since we ‘took back control’ through Brexit has eliminated many sources of that cheap labour and the days of offshoring production to distant low cost regions seem to be over because of endless disruption to supply chains.”
“Boosting our business investment and productivity remains an elusive objective. Successive governments have repeated the strategy of throwing tax breaks at the problem, despite clear evidence that other factors such as improved infrastructure, availability of suitably skilled local labour resources, affordable housing and plentiful funding are more significant to potential investors. These other considerations are of course difficult to deliver and require longer-term thinking and planning.”
“The Chancellor, Jeremy Hunt insists the economy ‘has turned a corner’. That may prove to be true, but it seems unlikely that this will take us onto a particularly steep staircase to higher growth.”