According to a new TUC analysis published, the UK suffered the highest inflation and lowest economic growth of any G7 country since the end of 2021 (when interest rates began to be raised). The analysis shows that UK prices shot up by 14.2% over this period while the economy grew by just 0.4%.
According to the Organisation for Economic Cooperation and Development, the UK will be the worst-performing economy in the G7 next year. High interest rates and the lingering effects of last year’s surge in inflation drag on growth. In a downbeat assessment, the Paris-based thinktank also downgraded its forecast for UK growth. It also assessed the economic performance of G7 countries.
Labour wants to improve the UK’s economic performance in G7 countries.
The new British government aims to post the fastest sustained economic growth among G7 nations. It hinges on ranking first for increases in per-capita output for two years running by the time of the next election. Achieving this target would represent a marked turnaround from Britain’s recent status. UK as one of the G7’s laggards for per-capita GDP growth, having been middle of the pack for much of the 2010s.
According to OECD data dating back to the 1970s, Britain has never topped the G7 ranking for GDP growth per person for two consecutive years. However, it came close in the early 2000s, coming top in 2001, second in 2002, and then top again in 2003. Economists say per capita GDP, which divides economic output by the population, represents a better gauge of living standards than overall GDP. It can be skewed higher by immigration. Starmer says he wants to raise overall economic growth to around 2.5% yearly. Similar to Britain’s pre-financial crisis average. Britain’s economy looks set to grow by around 1% this year. Although data on Thursday showed stronger-than-expected growth in May, posing an upside risk to existing forecasts.
What do figures say?
The latest figures show growth was led by a robust 0.3% month-on-month expansion in the service sector. It accounts for most of the British economy. This was the fifth consecutive month of recovery, driven by growth of 2.9% in retail trade after a fall of 1.8% in April.
The economic performance of G7 countries is different. UK GDP in Q1 2024 was 1.8% above its pre-pandemic level of Q4 2019. This compares with Eurozone GDP being 3.4% higher, with GDP in Germany up by 0.3%. The US had the highest GDP growth among G7 economies over this period, at 8.6%.
Forecasts about future economic
On 2 May, the OECD published new forecasts for the world economy. The OECD said the global economy is growing “at a modest pace,” with the effects of higher interest rates being felt. However, unemployment is low by historical standards. The OECD forecasts UK GDP to grow by 0.4% in 2024 and by 1.0% in 2025. A little lower than its previous forecast. The economic performance of G7 countries in this report was necessary.
On 16 April, the IMF published new forecasts for the world economy. The IMF said that global growth has been “surprisingly resilient”. However, global GDP growth over the next five years is expected to be low based on historical standards. The IMF forecasts that the UK GDP will grow by 0.5% in 2024 and by 1.5% in 2025. It is a slight change from its previous forecast.
Comparison of Economic performance of G7 countries: The UK will fall to the bottom
The OECD predicts the Economic performance of G7 countries and the fall of the UK. The UK’s growth of 1% is just behind Germany at 1.1%. The experts forecast US and Canada are to be the fastest-growing economies in the G7 next year. Both grew 1.8%. The OECD said persistent price rises would dampen Britain’s growth rate. Higher prices are in the services sector, and shortages of skilled staff will push back expected cuts in interest rates.
The UK’s economic performance since the 2008 financial crisis has been extremely poor in historical terms. However, in relative terms, it is not that different from other large European economies, which have also seen relatively slow growth. It is, therefore, a combination of UK-specific factors and broader European trends which drive the trend. By contrast, the gap between the US and advanced European economies, including the UK, has widened sharply. Sluggish growth is primarily the result of a sharp fall in productivity growth. This had averaged close to 2% per year before the crisis and fell to approximately 0.3% in the years after. This reflects an economy-wide slowdown. It is affecting both the private and public sectors. Productivity growth has been particularly weak in the latter).
The UK suffers from low investment
There is a consensus that low levels of private and public investment have held back productivity growth. The fairly low level of business investment in the UK pre-dated Brexit. Both aggregate data and survey proof strongly recommend that Brexit is at least in part responsible for the particularly poor performance since 2016. Investment has possibly been 10% lower than it would otherwise have been. It might translate to a decrease in productivity, and hence output, of a little over 1% of GDP.
When you see the economic performance of G7 countries, UK has some serious issues. Over the past two decades, two key trends dominated UK trade. a slow but steady reduction in the relative importance of the EU as a trading partner. another one is a shift in UK exports from goods to services. The result has been a widening of the UK’s goods deficit. Especially with the EU, and a growing services trade surplus. Surprisingly, since Brexit, the share of UK trade that is conducted with the EU has actually increased. However, it may have further accelerated the shift to service exports, as goods exports have stagnated. It is while services exports have continued to grow. Overall, the UK’s ‘trade openness’ (trade as a proportion of GDP) has fallen significantly. It is considerably more than in other advanced economies.
Main reasons for the UK’s economic problems
In fact, the UK’s current situation has lots of root causes. Element likes rising prices, shaky growth, high public debt, and lingering post-pandemic and Brexit. Its impact presents a uniquely challenging environment for the upcoming government. It’s possible that in such an environment, even small divergences in the governing party’s chosen policy mixes. It could result in significantly different economic outcomes. The slowdown is particularly stark when immigration-driven population growth is accounted for.
Gross domestic product (GDP) per capita grew just 4.3 percent from 2007 to 2023. It compared with 46 percent growth over the previous 16 years. According to research released earlier this month by the Resolution Foundation think tank. That is the lowest growth rate since 1826, according to the research.
