Politicians and voters must wake up to reality of a zero growth economy
The past six years have been the worst period for growth in normal peace time since the start of the Industrial Revolution over 200 years ago, says Paul Ormerod
The latest estimates from the Office of National Statistics show virtually no growth in the size of the economy in the period October to December 2025. In the final quarter of the year, GDP was a bare 0.1 per cent higher than in the previous quarter.
These figures are entirely typical of the experience of the British economy since the end of 2019, immediately before the pandemic.
Between the end of 2019 and the close of 2025, real GDP grew at an annual rate of just 0.8 per cent, or 0.2 per cent a quarter on average.
Over the same period, the population is estimated to have grown at an annual rate of 0.7 per cent, driven mainly by immigration.
So in terms of GDP per person, there has been to all intents and purposes zero growth since the end of 2019 – a mere 0.1 per cent a year to be precise.
It is hard to overstate the importance of this number.
It represents the worst six year period for growth in normal peace time since the start of the Industrial Revolution over 200 years ago.
Historically unprecedented
The early 1930s saw a financial crisis which was considerably more severe than the one of the late 2000s. It fully merits its description of the Great Depression. The years 1930 and 1932 saw a cumulative fall in GDP of some six per cent. During the course of 1932, the steep drop in output levelled out and there was then a mini boom with growth of three per cent in 1933 and nearly seven per cent of 1934
The demobilisations after the two world wars led to lower growth than in the most recent six years, an overall contraction in fact. But during each of those wars the economy had of necessity been run absolutely flat out in a way which was unsustainable. Once the millions in the armed forces had been reintegrated into civilian life, strong economic growth was resumed.
Neither the electorate nor the political class seems to have understood the implications of a zero growth economy.
It means that the resources available to the economy, whether for private or public use, do not change.
Average living standards do not rise. Any increases in public spending can only be paid for by either issuing more government debt or by raising taxes.
Government debt is already high by recent historical standards, at around 100 per cent of GDP. One thing which the Chancellor, Rachel Reeves, does understand is that the appetite in the bond markets to accommodate increases in this ratio is slight, if indeed it exists at all.
High levels of debt in turn imply high levels of payments of interest on the debt. These are estimated to be some £120bn the 2025/26 financial year.
This figure represents around eight per cent of total public spending, triple the amount spent on defence for example. It is the cost of borrowing in the past for public spending which has now been and gone.
The limits to taxation are also already being reached. Stories about wealthy individuals leaving the country are often exaggerated. But when just one per cent of income tax payers account for a third of the total take from the tax, it does not need many to quit the UK for a real impact to be made.
When Labour lost the 2010 election, the outgoing Treasury minister Lian Byrne famously left a note for his successor “I am afraid there is no money left”.
Well, there really is no more money left now. Living in an economy with zero growth is a most unpleasant experience. The electorate needs to wake up to the fact.
Paul Ormerod is an Honorary Professor at the Alliance Business School at the University of Manchester. You can follow him on Instagram @profpaulormerod