New Era, New Problems?
If you haven’t already noticed it looks as if a new era has begun for the UK. Governor of the Bank of England, Mark Carney, claimed that Britain has entered a decade of potentially profound structural change after interest rates were cut.
This caused England’s employment to rise by 208,000 to 32.90 million. It has become the biggest increase since the three months to January 2019, and much stronger than the median forecast in a Reuters poll for a rise of 110,000.
Not so fast – with Brentry in 1973 and Brexit there have been four recessions, three boom/busts with the housing market and a slight increase in the manufacturing capacity.
There have been periods of sustained growth starting with the 1980s and the 1990s and early 2000s that culminated in painful slumps.
North Sea oil came and gone, and structural problems of the economy go back decades but have become impossible to ignore since the financial crisis of 2008.
100 years before the financial crisis, output per worker grew by about 2% a year on average but since 2010 it has slowed to 0.5% a year.
If it continued to grow at its former rate, the economy would be about 20% bigger than it currently is.
The UK’s growth rate since it joined what was then the European Economic Community (EEC) in 1973 has been slower than it was in the decades preceding entry.
Not All Exits Have To Be Ugly
What’s interesting is that growth has been concentrated in one corner of the economy, London and the south-east.
Brexit day has found the UK business remarkably chipper – and certainly a lot more upbeat than it was throughout 2019 having investors believing that it’s a clean break to make the best of it.
Meanwhile, the economic performance of other EU countries hasn’t been that good.
Those who thought Brexit was a mistake have pointed out that relative to Germany and France the UK has done better post-1973 than it did in the 1950s and 1960s.
However, that is because the trend growth rate in mainland Europe has slumped from more than 4% to a little over 1% today.
This economic boom as caused many employers to remain worried that uncertainty will continue this year because Prime Minister Johnson has ruled out extending a Brexit transition beyond the end of 2020.
Saying he will clinch a trade deal with the European Union by then. Only time will tell how positive this economic boom is for the UK.
