UK growth since 2010 has been lacklustre and largely driven by immigration, says report | Economic growth (GDP)
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Rishi Sunak’s campaign claim that The UK economy is now ‘going gangster’.” has been undermined today by a report which claims that growth since 2010 has been “unimpressive” and the result of a growing population caused mainly by high levels of immigration.
The Life in the Slow Lane study by the politically independent Resolution Foundation will add to the consensus among economists and academics that the main economic problems and challenges facing this country are being avoided by parties during the general election campaign.
Both Labor and the Tories have promised to cut immigration if they form the next government, while saying little about how they will boost productivity through greater investment to drive real, long-term growth. The report says population growth has averaged 0.7% a year in the UK since 2010, equivalent to six million people, and is the main driver of GDP growth. Three-quarters of this total population growth is the result of immigration.
“Looking at GDP per head, which takes population growth into account, the UK’s overall and relative performance is much worse,” the Foundation says. “GDP per head has grown by just 4.3% over the past 16 years, compared to 46% in the previous years.” The report said a growing population masked the UK’s “appalling” productivity record (productivity per worker), which grew by only 0.6% per year in 2010. Since the financial crisis of 2008, productivity growth has been the slowest in two centuries.
Tory peer David Willetts, president of the Resolution Foundation, said: “Our report shows that the raw figures for GDP growth are overstating our performance as the population increases. GDP per capita growth is too low. We need to increase investment to grow the economy, and party manifestos need to acknowledge how serious the problem is and show how to deal with it. Campaigns to date have not really risen to this challenge.”
Looking ahead, the report says the employment boom of 2010 is unlikely to be repeated. Migration levels are expected to fall from 685,000 in 2023 to around 350,000 a year over the next five years, while an unhealthy population and the fact that much of the UK’s large baby boomer cohort will retire will prove a further downside pressure on future labor force growth.
Greg Thwaites, director of research at the Resolution Foundation, said: “The extra 6 million people in Britain certainly made the economy bigger, but it did little for GDP per head. The UK’s record in terms of productivity – which is what really matters for living standards – is extremely poor.’
Since 2019, the UK has consolidated its position as the world’s second largest exporter of services after the US, the report said. But “far less welcome” is its “weak performance in goods trade”, with 57% of manufacturing businesses “still grappling with the extra paperwork, customs and border checks that have increased export challenges post-Brexit”.
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Sunak argued that the UK’s return to growth in the first quarter of 2024 meant the economy was “going gangster”, in a bid to boost the Tories’ electoral chances.
The Resolution Foundation report puts Sunak’s claim into context: “However, one quarter of growth does not tell the whole story – what matters is the overall picture of how the economy has performed since 2010, where the picture remains stagnant from the financial crisis. In this context, what ultimately matters for household living standards is not GDP growth, but productivity growth… By this measure, a 0.4% annual productivity growth rate since 2007 is the lowest for an equivalent period of 200 years and this left the average real wage £14,400 below the pre-financial crisis trend.’
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