UK economy ‘languishing’ behind peers as living standards stagnate
The Labour government risks leaving the UK economy falling further behind major trading partners, left-leaning economists have warned, as they urged Rachel Reeves to ramp up growth plans ahead of crucial meetings in Davos this week.
A new report by the Resolution Foundation, the think tank where several current Treasury ministers brainstormed policies before becoming MPs, has hit out at the stagnation in living standards across the country.
In a warning to Reeves, economists said the UK was “languishing” 15 per cent behind the likes of Germany, France and Canada in GDP per head.
The report bemoaned the government’s indecisiveness, claiming policy uncertainty had been greater over the course of this parliament “than any of the previous seven” Conservative governments.
The lack of progress on planning reform and boldness on trade were highlighted as key areas where government policymaking has fallen short of expectations among researchers at the think tank.
Economists also criticised officials’ hesitation in capital expenditure plans, including in transport and research and development (R&D), which it said would not rise as a share of GDP until 2030.
Labour urged to be ‘bold’ on trade
They called on Reeves to attract further investment in the UK at meetings during the World Economic Forum conference in Switzerland.
Reeves is expected to meet with a host of top banking executives, including JP Morgan’s Jamie Dimon, and will likely brush shoulders with senior finance ministers including US treasury secretary Scott Bessent.
Resolution Foundation research director Greg Thwaites said it was time for the UK to “catch up” with other major economies’ living standards levels after being “caught by Italy”.
“[The government] has spent much of the past 18 months undermining [its] strategy with policy U-turns, kite-flying tax ideas and timidity in areas like trade where it needs to be bold,” Thwaites said.
“With signs that productivity may be turning a corner, the government must capitalise by ramping up its plans.
“It should redouble efforts to unblock housebuilding in major cities, focus job support for young and older workers, and decide whether to bite the bullet and reverse some of the damage from Brexit.”
The Resolution Foundation has come under fire for some of its government demands in the past.
In a list of solutions for the UK economy in late 2023, a report led by Torsten Bell, who is now the pensions minister, called for a higher tax burden on “other sources of income and wealth” in order to repair public finances and increase public expenditure.