The recession that the Treasury and others forecast would follow the EU referendum never came. But we now have the clearest evidence yet of an economic slowdown. In the first quarter of 2017, GDP grew by just 0.3 per cent, down from 0.7 per cent in the previous three months and the slowest rate since the beginning of 2016.
For individuals, growth is now almost non-existent. GDP per capita rose by 0.1 per cent, continuing the worst living standards recovery on record. As the Resolution Foundation noted, GDP per capita is just 1.7 per cent above pre-crisis levels, compared to 16.3 per cent after the ’90s recession and 24.5 per cent following the ’80s recession. Higher inflation (owing to the pound’s depreciation) and stagnant pay are hindering Britain’s main source of growth: consumption (which accounted for 100 per cent of per capita growth in 2016).
As I recently noted in my column, the economic slowdown was another reason for Theresa May to call an early general election. A renewed living standards squeeze has begun but it is too early for much political damage to result.
It was precisely to deny prime ministers the chance to call an election at the most favourable moment that many argued for the introduction of fixed-term parliaments. Labour had little choice but to constent (though some argue Jeremy Corbyn should have forced Theresa May to hold a vote of no confidence). But today’s figures will be cited as evidence of why future prime ministers should not be allowed to repeat May’s trick.
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