Why has Britain's economy grown so slowly under the Conservatives? | Business and Economy

As Britain heads to a general election on Thursday, voters' top concern is the state of the economy.

Since the Conservatives came to power 14 years ago, Britain's economy has slowed dramatically.

This slowdown is even more pronounced when considering population growth, particularly due to immigration, and including the period before the onset of the global financial crisis.

A study released earlier this month by the Resolution Foundation, a think tank, found that gross domestic product (GDP) per capita grew by just 4.3% between 2007 and 2023, compared with 46% growth over the previous 16 years.

This is said to be the lowest growth rate since 1826.

British Prime Minister Rishi Sunak has insisted the economy is recovering with growth picking up and inflation falling, but Britons are expected to abandon the Conservative Party in favour of Labour, led by human rights lawyer-turned-politician Keir Starmer.

Why is the British economy so weak?

Britain's economic woes stem above all from its poor record of productivity growth.

Increased productivity—the ability of workers to produce more with less—is a key driver of economic growth and rising standards of living.

Under the Conservatives, Britain's productivity growth has lagged far behind other countries.

According to the Resolution Foundation, GDP per hour grew by an average of 0.6% a year in the 2010s, compared with 2.2% in the decade before the financial crisis. That’s the worst performance of any G7 country except Italy.

According to OECD data, UK GDP per hour grew by around 6% between 2007 and 2022, compared with 17% in the US, 12% in Japan and 11% in Germany.

What does this mean to the average person?

The bottom line is that British incomes are stagnant.

An analysis of disposable income by the non-partisan research institute Centre for Cities found that Britons had on average £10,200 ($12,950) less to spend or save between 2010 and 2022 than they had between 1998 and 2010.

What caused Britain's productivity gap?

It is widely believed that Britain's productivity gap is due to years of chronically low investment compared with other advanced economies.

According to a PwC analysis of World Bank figures, UK investment spending will amount to 18% of GDP between 2017 and 2021, compared with 25% of GDP in Japan, 23% in France and 21% in the US.

David Spencer, director of the University of Leeds Business School, told Al Jazeera that the problems were symptoms of a core problem: a lack of investment by governments and businesses.

Years of austerity have actually created barriers to growth. They have actively suppressed growth by reducing the scope and effectiveness of social and economic infrastructure. Private enterprise has become too dependent on profit at the expense of investment in capital and people. The result is a low-growth, low-productivity, low-wage economy.

Will there be economic growth in Britain?

The UK economy has been struggling for more than a decade, but there have been some positive signs in recent times.

The economy emerged from recession earlier this year, with first-quarter GDP growing by a better-than-expected 0.7% and inflation hitting its target of around 2%.

Some forecasts suggest the UK will outperform other countries in the coming years.

The International Monetary Fund (IMF) forecasts that Britain's GDP per capita will grow by 6.2% between 2024 and 2029, faster than all other G7 economies except the United States and Japan.

How will Britain achieve economic growth?

Britain's long-term prospects ultimately depend on its ability to close the productivity gap.

The Resolution Foundation report said the UK had the potential to boost productivity, describing it as a ray of hope, if not a panacea.

The think tank said productivity, measured as GDP per hour, was 13-19% higher in the US, Germany and France, representing a significant productivity gain the UK could aim for.

In fact, if the UK were to move to the average productivity level of these countries, productivity would increase by 17%.

Spencer said major policy changes were needed to transform Britain's economy.

As always, it is easier to talk about change than to make it happen. But with the right will and policy mix from government, change is achievable.

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