The Resolution Foundation has warned that the UK’s economic bounce back following last year’s recession is “where the good news ends”, particularly on living standards.
Recession in the last two quarters of 2023 has been replaced with growth as the UK experienced the fastest growth of any G7 economy in the first six months of 2024.
However, the country’s GDP per capita is less impressive, the foundation said. This is an issue because it is GDP per head that matters for living standards.
Only US grew faster
UK GDP grew by 0.6 percent in the second quarter of 2024, driven by the services sector, and professional science and technology services.
Among G7 countries, only the US grew faster in the second quarter at 0.7 per cent.
UK growth for the year so far stands at 1.3 percent, which is the strongest growth in the group and ahead of the US at 1.1 percent.
However, UK medium-term growth is the measure to watch as it shows the scale of the challenge that the new government is facing, the foundation said.
Population growth matters
The UK’s growth record since the beginning of the covid-19 pandemic (counted from the fourth quarter of 2019) is the second worst in the G7 at 2.4 percent. The only country with lower growth for the same period is Germany at 0.2 percent.
The foundation said that when the figures account for the UK’s rapid population growth in recent years, driven by historically high levels of migration, GDP per capita is in fact 0.4 percent lower today than it was on the eve of the pandemic.
And even in the latest data (for the second quarter of 2024), the UK’s GDP per capita grew by “a far more modest” 0.3 percent.
Medium-term ‘less impressive’
Simon Pittaway, senior economist at the Resolution Foundation, said: “The UK economy has continued to bounce back from its recession last year, and has recorded the strongest growth of any G7 economy over the past six months.
“But that’s where the good news ends. Britain’s medium-term record is far less impressive, and has been driven by a growing population rather than rising productivity.
“Without a return to productivity growth, living standards will continue to stagnate and Britain will continue to fall behind its peers.”
Cost of living key issue
Further ONS data, collected from 5 to 28 July 2024, showed that the cost of living remains an important issue for 88 percent of UK adults.
More than half (54 percent) of people surveyed reported their cost of living had stayed the same in the past month with less than half (45 percent) reporting that their cost of living had increased.
And a quarter of adults told ONS they believed they would be unable to pay an unexpected but necessary expense of £850.
