Britain should not accept its status as the ‘sick man of Europe’2 min read
The writer is a former permanent secretary at the UK Treasury
The IMF has held a totemic place in British discourse ever since 1976, when the country lost the confidence of the markets and had to apply for an emergency loan. So when the Fund predicts, as it did this week, that the UK will grow slower than any other advanced economy, it needs to be taken seriously.
Add to the mix a level of industrial unrest not seen in decades, the Bank of England revising down to 1 per cent its view of the economy’s trend rate of growth, a rate not experienced since the 1970s, and the general gloom around the third anniversary of Brexit — and it’s tempting to ask whether Britain has regained its status as the “sick man of Europe”.
Forecasting is a mug’s game. Britain’s economy may or may not grow this year. Germany and France may grow faster. But none of the big European economies are predicted to grow by more than 1 per cent. This is a world of small numbers in which no country will be satisfied with its performance.
Gross domestic product statistics are notoriously unreliable in the short run, which is why, when I was at the Treasury, I preferred to focus on revenues. These rarely lied. They may be flattered by inflation at present but they still indicate that the economy has been stronger than many had feared. Falling energy prices will provide further support.
Britain still has a lot going for it. It has strong university cities, not least London, a thriving research base, great creative industries and an irrepressible financial sector. Unlike in the 1970s it has a dynamic labour market. We should not get too downhearted.
But there is no denying that Britain has a problem.
First, Rishi Sunak, the prime minister, and Jeremy Hunt, the chancellor, are still picking up the pieces from their disastrous inheritance. To regain credibility, they have had to pursue a much more restrictive policy than would have been the case had Liz Truss never become premier….
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