Sarah Beament has spent her career in the City advising on capital raising in the energy and power sector.
No one could accuse Labour of letting the facts get in the way of a good story. The UK is, by their account, “the sick man of Europe” – and Brexit was an economic mistake.
So often do Labour repeat these falsehoods that they are starting to become received wisdom, aided, in no small part, by the turbulent macro-economic environment. And few, outside the City, seem to have noticed that Labour’s claims are demonstrably false.
To debunk these myths, I will demonstrate that the UK has performed better on all major economic indicators – GDP growth, wages and unemployment and inflation – than its European counterparts and that, as Conservatives, we need to be more robust in setting the record straight.
The UK economy has grown as much, or more, than all G7 European peers since Brexit
Let’s start with the big guns: annual GDP growth, the metric that is often considered a primary indicator of the health of the economy. Between 2016-2022, the UK averaged real GDP growth of 1.2 per cent per annum. If that doesn’t seem like much to you, have a look at the rest of G7 Europe; we are level with France on 1.2 per cent, and better than Germany and Italy at 1.1 per cent and 0.9 per cent respectively (IMF April 2023 WEO Update).
Looking at more recent data, the UK’s performance is mixed. In 2022 the UK was the best performing G7 economy at four per cent. In 2023, it will be the worst at -0.3 per cent.
Both statistics illustrate the danger of cherry-picking annual data to make a point. If you look at the average across those two years of 1.9 per cdent, the UK is the second best -erforming European G7 economy behind Italy at 2.2 per cent and substantially outperforming Germany at 0.8 per cent.
This is not an attempt to sugar coat that 2023 will be an exceptionally painful year. Nevertheless, if you weren’t proclaiming that Brexit is an economic miracle last year, then you can’t argue it is a catastrophic failure this year.
Much more important that a single year is the direction of travel. So far the post-Brexit journey has been good relative to our European peers, but where are we headed?
Setting the pace for economic growth in Europe
The IMF forecasts that the UK will be best performing G7 European economy between 2024-2028. Average growth over the period is forecast to be 1.7 per cent; above France, Germany, and Italy at 1.6 per cent, 1.5 per cent and one per cent respectively (IMF April 2023 WEO Update ). While we should be cautious about such long-term forecasts, it is undeniable that the economic outlook for the UK is relatively strong, and it speaks to the confidence economists have in the trajectory of the UK economy.
If the mention of strong long-term G7 GDP growth is starting to ring some bells, I am happy to refresh your memory. One of Keir Starmer’s five missions was to deliver the “highest sustained economic growth in the G7” by the end of Labour’s first term – so potentially by 2029.
A fun fact: when Starmer made that announcement in February, the UK was, based on the IMF data at the time, already forecast to have the strongest economic growth in the G7. So much for a “bold mission” requiring “relentless focus” for a Labour government to deliver it.
Workers are receiving a bigger slice of a pie
The economic well-being of the well-off is not necessarily correlated to the economy as a whole and, because the well off disproportionately impact GDP statistics, it is important to look beyond absolute GDP growth to the distribution of that growth.
Indeed, I still remember one of the most succinct comments I heard during the Brexit debates. A woman, responding to economists forecasting a collapse in UK GDP as a result of a Leave vote, said: “that’s your GDP, not mine”. Quite how on the nose that remark was only became apparent once the result was in and the analysis started on why.
Leave had won. But the writing had been on the wall for years. Since the Global Financial Crisis (GFC) real average weekly pay growth in the UK has been negative at 0.7 per cent per cent . That is the average year-on-year decline on a monthly basis between September 2008 (the Lehman crash) to June 2016, adjusted for inflation.
Let me put it in plain language: workers were becoming poorer for pretty much eight years running up to Brexit. Between July 2016 to January 2023, however, the opposite is true, real wages have been increasing by 0.5 per cent annually, and that is even after you include the impact of the last twelve months of high inflation and declining real wages.
Another measure which supports the claim that workers are getting a bigger share of the pie since Brexit is the share of total GDP which is captured by labour. Before the GFC, in 2007 it was 60.6 per cent, and by 2016 that had fallen to 58.1 per cent. In other words, the rich became richer, and the poor became poorer.
However, since Brexit it has risen again to 60 per cent. These numbers might not seem like a lot, but an additional 1.9 per cent of GDP going to workers is a small percent of a very large number and it is the reversal of a negative trend that is most important.
How individuals respond to a larger piece of the pie going to workers post-Brexit will likely depend on which side their bread is buttered; business owners and those looking for discount price home renovations will no doubt find it negative. But it is important to note that real wage growth is a feature, not a bug, of Brexit and one Conservatives should be vocal about as part of their track record of delivering tangible economic benefits to voters. Put simply, Brexit has begun to deliver on its promise to give greater economic power to the British worker.
Inflation and unemployment – better placed than most
The final measures are inflation and unemployment. Isn’t the UK suffering more than its European peers? Again, not really. As I already mentioned, there is no hiding from how hard 2023 is going to be for everyone in the UK.
However, inflation isn’t the sole determinant of how severely people are experiencing economic distress. The aptly named Misery Index adds inflation to unemployment to give an indication of the misery experienced by citizens. When compared to our European G7 peers, the UK is firmly above average; Germany is marginally ahead, but both France and Italy are lagging. So, the UK is far from being the “sick man of Europe” and even in 2023, our annus horribilis, it is one of the best places to be in Europe economically.
Making the case for the Conservatives economic track record
All things considered, the UK is coping with the European economic malaise better than its European peers. It has been a tough couple of years for economies globally with a quick succession of black swan events; covid, war, commodity prices spikes and supply-side shocks leading to inflation. These external shocks have buffeted all major economies and performance has been poor across the board. But the key takeaway is that poor economic performance is best judged relative to peers, and on that measure, the Conservatives have a lot to be proud of.
As we look to the next election and beyond, it is especially important that we are clear eyed on our economic record and don’t allow the narrative of mismanagement to take hold.
Sarah Beament has spent her career in the City advising on capital raising in the energy and power sector.
No one could accuse Labour of letting the facts get in the way of a good story. The UK is, by their account, “the sick man of Europe” – and Brexit was an economic mistake.
So often do Labour repeat these falsehoods that they are starting to become received wisdom, aided, in no small part, by the turbulent macro-economic environment. And few, outside the City, seem to have noticed that Labour’s claims are demonstrably false.
To debunk these myths, I will demonstrate that the UK has performed better on all major economic indicators – GDP growth, wages and unemployment and inflation – than its European counterparts and that, as Conservatives, we need to be more robust in setting the record straight.
The UK economy has grown as much, or more, than all G7 European peers since Brexit
Let’s start with the big guns: annual GDP growth, the metric that is often considered a primary indicator of the health of the economy. Between 2016-2022, the UK averaged real GDP growth of 1.2 per cent per annum. If that doesn’t seem like much to you, have a look at the rest of G7 Europe; we are level with France on 1.2 per cent, and better than Germany and Italy at 1.1 per cent and 0.9 per cent respectively (IMF April 2023 WEO Update).
Looking at more recent data, the UK’s performance is mixed. In 2022 the UK was the best performing G7 economy at four per cent. In 2023, it will be the worst at -0.3 per cent.
Both statistics illustrate the danger of cherry-picking annual data to make a point. If you look at the average across those two years of 1.9 per cdent, the UK is the second best -erforming European G7 economy behind Italy at 2.2 per cent and substantially outperforming Germany at 0.8 per cent.
This is not an attempt to sugar coat that 2023 will be an exceptionally painful year. Nevertheless, if you weren’t proclaiming that Brexit is an economic miracle last year, then you can’t argue it is a catastrophic failure this year.
Much more important that a single year is the direction of travel. So far the post-Brexit journey has been good relative to our European peers, but where are we headed?
Setting the pace for economic growth in Europe
The IMF forecasts that the UK will be best performing G7 European economy between 2024-2028. Average growth over the period is forecast to be 1.7 per cent; above France, Germany, and Italy at 1.6 per cent, 1.5 per cent and one per cent respectively (IMF April 2023 WEO Update ). While we should be cautious about such long-term forecasts, it is undeniable that the economic outlook for the UK is relatively strong, and it speaks to the confidence economists have in the trajectory of the UK economy.
If the mention of strong long-term G7 GDP growth is starting to ring some bells, I am happy to refresh your memory. One of Keir Starmer’s five missions was to deliver the “highest sustained economic growth in the G7” by the end of Labour’s first term – so potentially by 2029.
A fun fact: when Starmer made that announcement in February, the UK was, based on the IMF data at the time, already forecast to have the strongest economic growth in the G7. So much for a “bold mission” requiring “relentless focus” for a Labour government to deliver it.
Workers are receiving a bigger slice of a pie
The economic well-being of the well-off is not necessarily correlated to the economy as a whole and, because the well off disproportionately impact GDP statistics, it is important to look beyond absolute GDP growth to the distribution of that growth.
Indeed, I still remember one of the most succinct comments I heard during the Brexit debates. A woman, responding to economists forecasting a collapse in UK GDP as a result of a Leave vote, said: “that’s your GDP, not mine”. Quite how on the nose that remark was only became apparent once the result was in and the analysis started on why.
Leave had won. But the writing had been on the wall for years. Since the Global Financial Crisis (GFC) real average weekly pay growth in the UK has been negative at 0.7 per cent per cent . That is the average year-on-year decline on a monthly basis between September 2008 (the Lehman crash) to June 2016, adjusted for inflation.
Let me put it in plain language: workers were becoming poorer for pretty much eight years running up to Brexit. Between July 2016 to January 2023, however, the opposite is true, real wages have been increasing by 0.5 per cent annually, and that is even after you include the impact of the last twelve months of high inflation and declining real wages.
Another measure which supports the claim that workers are getting a bigger share of the pie since Brexit is the share of total GDP which is captured by labour. Before the GFC, in 2007 it was 60.6 per cent, and by 2016 that had fallen to 58.1 per cent. In other words, the rich became richer, and the poor became poorer.
However, since Brexit it has risen again to 60 per cent. These numbers might not seem like a lot, but an additional 1.9 per cent of GDP going to workers is a small percent of a very large number and it is the reversal of a negative trend that is most important.
How individuals respond to a larger piece of the pie going to workers post-Brexit will likely depend on which side their bread is buttered; business owners and those looking for discount price home renovations will no doubt find it negative. But it is important to note that real wage growth is a feature, not a bug, of Brexit and one Conservatives should be vocal about as part of their track record of delivering tangible economic benefits to voters. Put simply, Brexit has begun to deliver on its promise to give greater economic power to the British worker.
Inflation and unemployment – better placed than most
The final measures are inflation and unemployment. Isn’t the UK suffering more than its European peers? Again, not really. As I already mentioned, there is no hiding from how hard 2023 is going to be for everyone in the UK.
However, inflation isn’t the sole determinant of how severely people are experiencing economic distress. The aptly named Misery Index adds inflation to unemployment to give an indication of the misery experienced by citizens. When compared to our European G7 peers, the UK is firmly above average; Germany is marginally ahead, but both France and Italy are lagging. So, the UK is far from being the “sick man of Europe” and even in 2023, our annus horribilis, it is one of the best places to be in Europe economically.
Making the case for the Conservatives economic track record
All things considered, the UK is coping with the European economic malaise better than its European peers. It has been a tough couple of years for economies globally with a quick succession of black swan events; covid, war, commodity prices spikes and supply-side shocks leading to inflation. These external shocks have buffeted all major economies and performance has been poor across the board. But the key takeaway is that poor economic performance is best judged relative to peers, and on that measure, the Conservatives have a lot to be proud of.
As we look to the next election and beyond, it is especially important that we are clear eyed on our economic record and don’t allow the narrative of mismanagement to take hold.