Anaemic economic growth since the financial crisis has left the average UK household £8,800 worse off compared to families in Germany and France and other comparable countries, reveals a study published today.
Widening income gaps between Britain’s poorest and richest, compounded by flatlining productivity growth since the financial crisis, has led to families missing out on higher living standards, according to the Resolution Foundation (the Foundation) and the London School of Economics (LSE).
Despite making ground on economies of comparable size between the 1990s to the mid noughties, the UK’s productivity now lags far behind its rivals.
This gap – now triple the amount it was compared to Germany and France in 2008, the equivalent to £3,700 of lost output per person – has led to a decade of lost improvements in living standards.
Sluggish productivity – measured as output per hour – growth has resulted in pay growth dropping below zero since the financial crisis. Before then, wages grew an average of 33 per cent a decade.
The Foundation and LSE’s research illustrates the scale of income average households have foregone that could have been used to cushion the impact of the cost of living crisis.
Inequality is also partly to blame for UK living standards trailing other countries.
“While the top 10 per cent of households in Britain are richer than those in many other European countries, middle-income British households are not: they are nine per cent poorer than their counterparts in France, while the poorest fifth of households in Britain are now over 20 per cent poorer than their French and German equivalents,” the report, which pulls together findings from 30 papers into one publication called Stagnation nation: Navigating a route to a fairer and more prosperous Britain, found.
Torsten Bell, chief executive of the Foundation, said Britain’s economic strengths, such as its world leading services industry, “are not being built on,” resulting in the country falling behind its counterparts.
Ignoring the UK’s strengths has created “a toxic combination with the UK’s high inequality, leaving low-and middle-income households far poorer than their counterparts in similar countries,” he added.