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This week, in yet another setback to Rishi Sunak‘s efforts to showcase how the Conservatives have created – over a decade and a half – a robust economy, the Office for National Statistics (ONS) reported that monthly growth in April in the UK had flatlined.
The British economy was said to be struggling with a faltering retail sector, a decline in manufacturing, and a reduction in construction output, after a 0.4% rise in March. The City’s pundits appeared to blame the weather and not the cost-of-living crisis for the lack of growth. The consequences of Brexit, as it seems to be so increasingly, was absent from the finger-pointing.
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But this news of the parlous state of the British economy comes amidst more of the same. The UK’s labour productivity had increased by just 0.4% annually over the 12 years following the financial crisis – half the average growth rate seen in the 25 wealthiest OECD countries – and has resulted in a cumulative loss of £10,700 in wage growth for the average worker’s annual salary.
Middle-income individuals in the UK are now 20% poorer than their counterparts in Germany and 9% worse off than those in France.
And those born in the early 1980s are almost half as likely to own a home by age 30 compared to their parents’ generation.
These are just some of the dire findings of the UK’s economy detailed in The Economy 2030 Inquiry, a recent three-year collaboration between the Resolution Foundation (RF) and the Centre for Economic Performance at the London School of Economics (LSE).
UK Goods Trade Down £44 Billion in Five Years – but Government Still Tries to Sell it as ‘Cause for Celebration and Renewed Pride’
When you exclude precious metals that offer “no real economic benefit to the UK” the figures look much different
Despite bad news coming upon bad news, the – until recently – Business and Trade Secretary Kemi Badenoch, has acted as if none of this was happening. She told Chatham House, “we have succeeded, not in spite of embracing free trade, but because of it” and claimed it is “easy to produce statistics showing that exports and investments are up”.
But some statistics are less disputed than others. As this paper has noted, the UK’s parlous goods exports would be far worse if you did not include the UK’s ‘empty calorie’ trading of global gold. If you took out such high frequency precious metals trading, it would mean that the UK’s goods exports are down some £44 billion since 2018. And that the UK’s goods exports are down, the UK’s service exports are up.
As – Badenoch might not be able to dismiss this counterclaim – her own government states: “In real terms, UK exports decreased by 0.5% in 2023…a 6.7% increase in services exports and a 7.7% decrease in goods exports.”
One thing is certain. The one silver lining in this dire economic news is that service exports are buoying up the UK economy. Indeed, last year the UK ranked second in the world for such exports – including ICT (Information and communication technology), education, culture, and finance.
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The leading nation the UK exports such services to is the United States, where the $129.7 billion of services provided equates to over a quarter of the UK’s entire service export economy (27.6%).
So where does this post-Brexit shift towards a national reliance on service exports and, more specifically, service exports to the US leave the UK?
It has two fundamental impacts.
First, it makes London even more central to the UK’s economy. Secondly, it makes London even more expensive to those Londoners not linked to US-service provision.
London – the Black Hole
London’s dominance of the UK service economy is evident: the capital’s service exports grew by some 47% between 2016 and 2021, reaching £152.2 billion. In stark contrast, other major UK cities like Greater Manchester and Birmingham saw a minimal growth of 11% and 3%. While services exports in cities like Glasgow saw a modest growth, overall Britain’s other major cities have not kept pace.
Conversely, London’s share of UK service exports has surged from 38% to 46%. This dominance of London in the UK’s economy has been well charted, but Brexit and the Conservatives seem to have done nothing to stop this.
Overpaid, Over-Impactful and Over-Here?
The main driver of this growth has been the US. So much so that, from certain angles, London is starting to look like Manhattan-upon-Thames.