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Ten years after the crash, the UK economy is going nowhere

Author
Published date
28 Sep 2018
After eight years of austerity, today’s revisions to the second quarter GDP figures suggest there’s no light at the end of the tunnel for workers feeling the squeeze
The Chancellor needs to acknowledge the damage his policies are doing to working people

Anniversaries are a great time to take stock.

So ten years after the financial crisis, how is the UK economy getting on?

Well, we’ve just endured the worst decade for growth since the war.

Workers are suffering the longest real-wage squeeze for two centuries.

On top of the unrelenting austerity, interest rates keep rising.

And today’s revisions to the second quarter GDP figures suggest there’s no light at the end of the tunnel.

Because across the board declines in growth show that, ten years after the crash, the UK economy is really going nowhere.

What’s in the figures

The figures make for grim reading.

The manufacturing sector is now back in recession, using the technical definition of two negative quarters in a row. A fall of 0.7% in of 2018 Q2 follows a fall of 0.1% in Q1.

Construction has rebounded a little (0.8% in Q2), but this fails to compensate for a revised fall of 1.6% in Q1.

And while service sector quarterly growth picked up to 0.6% from 0.3%, growth of just 0.1% in the most important ‘business services and finance’ sector was the slowest since the 2009 recession.

Declines across the board

Meanwhile, government demand fell by 0.4%, investment growth by 0.5%, imports by 0.2% and exports by a whopping 2.2%.

A steeper fall in exports than in imports means a widening trade deficit.

And at £20.3 billion, we’re now facing the worst current account deficit for a year.

As the following chart shows, growth is falling in almost all areas of the economy:

Household debt rising

The only positive area in today’s figures was in the consumer sector, where quarterly growth was 0.4% (still a little down from 0.5% in Q1).

But the problem with consumer-led growth is that it leads to a shortfall between spending and incomes.

We recently warned that this shortfall had reached £34 billion over a record six quarters in a row. This record has been extended into a seventh quarter, with the total shortfall now at £42 billion.

That means unsecured borrowing (as a share of household disposable income) continues to rise, with the latest figure the second highest since 2009:

Time for action

This week the Chancellor finally announced that the Budget statement will take place on 29 October.

We hope he’ll use it as an opportunity to acknowledge the damage his party’s economic policies have done to working people over the last eight years.

And to set out a path that finally delivers an economy that works for working people.