Only a month has passed since Philip Hammond, Britain’s usually lugubrious Chancellor, declared that he was “positively Tigger-like” about the economy’s prospects. There was no reason to be so cheerful then – and there is certainly no reason to be cheerful now.
The UK’s GDP is estimated by the Office for National Statistics to have grown by just 0.1 per cent in the first quarter of this year – the slowest rate since 2012. GDP per head – a better measure of underlying growth – is thought to have fallen by 0.1 per cent.
Hammond, who notably avoided the traditional post-release interviews with broadcasters, said in a statement: “Today’s data reflects some impact from the exceptional weather that we experienced last month, but our economy is strong and we have made significant progress. Our economy has grown every year since 2010 and is set to keep growing”.
That the snow Britain endured had an effect on growth is indisputable. But the ONS judges it to be more minimal than the Chancellor suggests. The former said: “While some impacts on GDP from the snow in the first quarter of 2018 have been recorded for construction and retail sales, the effects were generally small, with very little impact observed in other areas of the economy.”
Britain’s fundamental economic weakness has long been clear. It neither invests nor exports enough. Its economy is overdependent on rising property prices, consumer spending and financial services. To this amalgam of woes, a new menace has been added: Brexit.
The spike in inflation, owing to the pound’s depreciation, has squeezed real wages (which are not forecast to regain their pre-crisis peak until 2025) and forced households to cut back. Britain’s uncertain economic future, meanwhile, has further deterred investment.
The UK’s problem is not, as in France, a lack of jobs (employment is at a record high of 75.4 per cent) but a lack of good and well-paid jobs. There are more overqualified employees in Britain than anywhere else in the EU; 1.4 million jobs are dependent on zero-hours contracts.
For a period, Theresa May appeared to understand the need to overhaul Britain’s economic model. But she struggled to translate rhetoric into reality and the epic task of Brexit has consumed all else.
For the first time in history, the economy is now forecast to grow at an annual rate of less than 2 per cent in every year. With the exception of Italy, Britain is expected to be the slowest-growing G7 country. That the Chancellor boasts that any growth at all is an achievement merely confirms that mediocrity has been normalised.
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