Home » Analysis: What happened to the UK economy? 5 charts break down the key election issue | CNN Business

Analysis: What happened to the UK economy? 5 charts break down the key election issue | CNN Business


London
CNN
 — 

When UK voters elect a new government on July 4, the health of the world’s sixth-biggest economy will likely be the main factor in deciding the outcome.

The Conservative Party of Prime Minister Rishi Sunak has been in office since 2010, a period that has included the twin shocks of a pandemic and war in Ukraine.

But the United Kingdom has also been held back by two self-inflicted wounds — deep austerity in the wake of the global financial crisis and the 2016 decision to quit the European Union, which raised new barriers to trade. Economic growth has been anemic in recent years, squeezing living standards and starving public services of funds.

In their first televised debate Tuesday, Sunak and Keir Starmer, the leader of the opposition Labour Party, clashed over Britain’s economic fortunes, taxes, immigration and the state of the National Health Service — key issues for voters, according to polling by YouGov. The stakes are high: opinion polls suggest the Conservatives are set to be booted from office, with Labour on course to win a UK election for the first time since Tony Blair took the party to victory in 2005.

Sunak pointed to rising wages and a strengthening economy as proof that his plan to “restore economic stability” is working. Starmer, meanwhile, attacked the Conservative Party for presiding over 14 years of economic decline.

Several audience members highlighted that many households are still experiencing a cost-of-living crisis and are struggling to pay their bills.

When they cast their ballots, voters will consider whether their lives have materially improved since 2010, when the Conservatives came to power. Here’s what data shows has happened to wages, living standards, the value of the pound, house prices and waiting times for medical treatment on the NHS.

Inflation, which hit a record 11.1% just 18 months ago, has eaten into households’ spending power. Although the annual pace of price rises has slowed — and wages have now grown faster than inflation for nine months in a row — real, or inflation-adjusted, pay has barely increased since 2010, which means people aren’t substantially better-off.

“Poor income growth has been an unfortunate feature of economic life in the UK over the last 15 years. And it has been slow growth for essentially everyone: rich and poor, old and young,” Tom Waters, an associate director at the Institute for Fiscal Studies (IFS), an economics research institute, said in a statement Friday.

“In the long run, what is needed is rises in productivity,” he added.

The Resolution Foundation makes the same diagnosis. The think tank has estimated that real average weekly earnings last year were £205 ($262) below the level they would have been had they carried on growing at the same pace as before the 2008 financial crisis.

“Weak productivity growth has delivered an unprecedented stagnation in real wages, even before the highest inflation in four decades hit,” it said in a report published in December.

Living standards have disappointed

Feeble growth in productivity — often measured as gross domestic product per hour worked — has hamstrung many advanced economies since at least the global financial crisis.

But the United Kingdom has fared worse than many peers, resulting in a bigger hit to incomes and also hurting living standards.

“The period between 2010 and 2024 has been economically remarkable,” Nick Ridpath, research economist at the IFS, said in a statement Monday, citing slow earnings growth and steep public spending cuts, among other things. “At the heart of it all was a period of abysmal growth in productivity and, with it, living standards.”

According to the IFS, in the 12 years before 2007, the average income of Britain’s working age population rose more than 40% — more than three times the growth in the United States and seven times that in Germany.

By contrast, between 2007 and 2019, the typical UK income increased just 6% — half the level of the United States and almost three times less than in Germany.

The UK currency has also taken a beating over the past 14 years — not helped by the Brexit referendum in June 2016 or the disastrous “mini” budget unveiled by former Conservative Prime Minister Liz Truss in September 2022.

Britain’s decision to leave the European Union has haunted the pound and inward investment into the country for almost a decade. A weaker currency exacerbates inflation — which peaked at a higher level in Britain than it did in the United States and the eurozone — because it raises the cost of imported goods.

“Brexit led to a large and long-lasting increase in uncertainty, which analysis shows reduced investment, which will have reduced output and productivity,” Clare Lombardelli, the incoming deputy governor for monetary policy at the Bank of England, said in a recent questionnaire published on the central bank’s website. “The data also shows that Brexit has had a negative effect on trade, which will also weigh on productivity,” she added.

While real wages have hardly grown, house prices have soared, pushing the dream of home ownership out of reach for many Brits.

From a peak of £291,716 ($373,236) in September 2022 the average house price fell to £284,691 ($364,242) last December, according to the Office for National Statistics (ONS). But prices remain high by historic standards, particularly when compared with incomes.

With affordability stretched, home ownership rates have fallen. In 2021, 62% of households in England owned their home, census data showed. That’s down from 68% in 2008/2009, according to official figures, shortly before the Conservatives came to power.

Millions of Brits are stuck in rental properties, which have also become more expensive. On average, households now spend more than 29% of their after-tax income on rent, up from 24% in 2010, according to Zoopla, a property company.

One of Sunak’s five promises to voters early on in his premiership was to cut NHS waiting lists. But the number of patients waiting for non-emergency treatment in England has climbed from 6.1 million in January 2023, when he made that pledge, to around 6.3 million in March this year.

The treatment spans diagnostic tests and scans, procedures such as hip and knee replacements, as well as non-urgent cardiac surgery, cancer treatment and neurosurgery. Since some patients require multiple treatments, the number of outstanding appointments stood at 7.5 million in March, according to NHS England.

NHS waiting lists have grown steadily since the onset of the Covid-19 pandemic, contributing to worker shortages in the UK. According to the ONS, ill health was the reason why more than 2.8 million people were “economically inactive” between January and March 2024. An ONS survey in February 2023 found that a third of the economically inactive were waiting for NHS treatment.