Why Has the UK Economy Stagnated for 20 Years? The Case Against Career Politicians

25/04/2026 by Tony Redondo

If we measure wealth by Real GDP per capita, that is total economic output divided by the population, adjusted for inflation, the UK has seen almost two decades of very low growth and is not much richer today than it was in 2007. An entire generation has grown up never having experienced meaningful economic growth and all the benefits it brings. Stagnation and relative decline is all they have ever known. This current period is an anomaly.

Yet the research shows that economic concerns are very much at the forefront of people’s minds. While the majority of respondents hold a bleak view of the British economy, people tend to grossly overestimate how wealthy Britain is compared to other nations. The data tells it straight: today’s Britain is poorer than all 50 US states, and closer to Bulgaria than to Switzerland in terms of real income levels.

Research by the IEA (Institute of Economic Affairs) shows that 87% of the British public supports economic growth, with just 9% saying the country is already wealthy enough. This consensus holds across all age groups, income levels, regions, and political affiliations.

After average growth of just 1.5% since 2008, Britons are deeply pessimistic. Two-thirds think the country is heading in the wrong direction and rate the economy as poor, while two-fifths see no major economic strengths at all. Blame for this stagnation is attributed to high energy costs (85%), high taxes (75%), trade barriers (74%), excessive regulation (74%), employment laws (64%), and restrictive planning laws (55%).

Is it a coincidence that Britain is governed by people who have never had to earn a living without the comfort blanket of the “magic money tree” of the public sector? They have never experienced the sharp-edged consequences of failing to cover overheads without a taxpayer-funded safety net. Not for a single day. No one currently around the Cabinet table has any private sector experience; the part of the economy that actually generates the wealth which pays for everything.

https://www.express.co.uk/finance/personalfinance/2194379/britain-only-has-itself-blame

Is this not the single most important fact about British public life. We are governed by professional politicians whose career pipeline is almost entirely uniform: school, PPE or a related degree, the Civil Service fast stream or a think tank, perhaps a spell as a local councillor, then a safe seat and a red box. At no point has a profit-and-loss account told them their idea didn’t work. The feedback loop that every private sector professional takes for granted simply does not exist in their world. This matters. Every regulation has a cost, every tax triggers a behavioural response, and every intervention has second and third-order consequences. In financial markets, if you misread convexity, the secret sauce of risk management, you are found out and shown the door. In government, you are reshuffled to a different department. The incentive structure could not be more perfectly designed to retain the incompetent.

Policy Volatility and the Pound: Does the UK Government Have a Long-Term Economic Vision?

In the private sector, regardless of circumstances, it falls to us alone to produce results. Contrast that with the think tank ecosystem, which produces people fluent in the language of policy who have never implemented anything. They can run theoretical models in their sleep but could not turn a profit running a corner shop. This has nothing to do with intelligence. It has everything to do with real-world experience.

The private sector has one thing the state fundamentally lacks: a kill switch. Bad companies go bust. Bad traders get sacked. The state simply absorbs failure, reclassifies it as “lessons learned,” and promotes the people responsible. The media and political classes may have scoffed at Mrs Thatcher in the 1980s when she spoke about knowing the price of a pint of milk, but I and everyone around me understood exactly what she meant.

Surely what we need is rigorous performance reviews for ministers and mandarins alike, and a systematic effort to identify and eliminate waste. Public sector productivity has been flatlining for years while the broader economy has improved, meaning taxpayers are steadily paying more and more for less and less.

Currency Exchange Rates Update

The Pound ended the week 0.5% up on the Euro and has recovered all its losses incurred in the last 30-days.

Against the US Dollar, the Pound finished the week little changed and up 1.35% over the last 30-days, close to a 2-month high.

https://www.saga.co.uk/money-news/should-you-move-somewhere-cheaper-in-retirement

This week’s inflation data made uncomfortable reading for the MPC (Monetary Policy Committee) policymakers at the BoE (Bank of England) and raises the prospect of interest rate rises later on this year, although the majority of analysts still expect the MPC to keep the UK base rate unchanged when they next meet on Thursday.

However, the outlook for the Pound is gloomy. Desjardins, the Canadian investment bank is warning those counting on a stronger Pound and predicts significant Pound Sterling weakness over the coming months against both the Euro and the US Dollar.

In the coming week, the key economic data releases and significant events include:

Tuesday            US Consumer Confidence

Wednesday    EU Consumer Confidence

                             Australia Consumer Confidence

                             Canada RBC Interest Rate Announcement

                             US Fed Interest Rate Announcement

Thursday          EU GDP, Employment, CPI Inflation & ECB Interest Rate Announcement

                             UK Bank of England Interest Rate Announcement

                             Canada GDP

                             US GDP  

Friday                UK Nationwide House Prices & PMI Manufacturing

                             US PMI Manufacturing

Most analysts expects the MPC to keep the UK Base Rate unchanged at 3.75%, with unanimous support likely. Forward guidance likely to be little changed, with the MPC set to reiterate its commitment to standing ‘ready to act’ should signs of second-round effects begin to emerge. Updated economic projections to point to lower GDP growth and higher inflation in 2026 but forecasts further out likely to be little changed and the Fed and ECB to also hold rates unchanged.

What’s in the news?

Chernobyl. On 26 April 1986, a reactor at a nuclear power plant in the then-Soviet, now Ukrainian town of Chernobyl exploded. Poisonous radiation quickly spread across the area, and eventually most of Europe, affecting 3.5 million people according to UN estimates.

Sarah Breeden, deputy governor for financial stability at the Bank of England is worried that global stock markets are too inflated. Breeden told the BBC, “There’s a lot of risk out there and yet asset prices are at all-time highs. We expect there will be an adjustment at some point.” It is unusual for BoE officials to be so candid about expectations for capital markets.

UK

The bond markets don’t lie, they price in the consequences of political choices, not rhetoric. This week, the UK 10-year gilt yields climbed to 4.96%, their highest since the global financial crisis of 2008 following the government’s £15 billion debt sale last week at a yield of 4.91%, the most for any 10-year gilt sale since the GFC whilst 30-year yields hit their highest levels since September 2025. Memories of the 2022 Liz Truss-era gilt crisis remain vivid. Current conditions leave little margin for error. UK government PSND (Public Sector Net Debt) is currently estimated at 93.8% of GDP and climbing. That 100% mark is a psychological and fiscal threshold the UK hasn’t consistently crossed since the early 1960s. This high debt level despite the Treasury received a record amount of inheritance tax last year as Labour’s targeting of property owners helped fund sweeping spending increases. Data out on Thursday showed that annual inheritance tax receipts rose to £8.5bn in the year between 2025 and 2026. These figures do not include any uplift from the government’s inheritance tax raid on family businesses and agricultural property or its decision to make pensions savings liable to the tax, which all only came into force this month.

Good news

At least in Cornwall, the sun is shining and Spring has arrived.

Not so good news

Chancellor Rachel Reeves took office on a pro-growth platform, promising to make Britain the leading economy in the G7. She would turbo-charge investment, remove the restrictions on building, form partnerships with industry to power the industries of the future, and invest directly through her National Wealth Fund. Two years on, she has finally topped a growth chart. Sadly, the wrong one as Britain has the fastest rising taxes in the world with growth lagging a long way behind.

Data from the OECD (Organisation for Economic Co-operation and Development) shows British taxes on workers are now growing at the fastest rate among its 38 members.

The IMF (International Monetary Fund) hit the UK with the biggest growth forecast downgrade of any country in the G7. Inflation in the UK will also be the joint-highest in the G7 this year along with the US. The IMF had previously predicted the UK economy to grow 1.3% in 2026, a slower pace than last year, but has now pencilled in a rise in GDP of just 0.8%. On a per head basis, that puts the UK bottom in the ranking of G7 nations.

The weak economic growth and rising costs are pushing public finances to a breaking point. The UK posted a £12.6bn deficit in March, delivering a stark warning to the Government. Tax revenues are not keeping up with public expenditure, and forecasts for growth suggest that this isn’t changing any time soon. Total borrowing for the financial year now stands at over £135 billion, threatening the sustainability of the Chancellor’s fiscal rules. The tax base is stagnating, as inadequate growth leaves government revenues lagging. Meanwhile, spending pressures keep rising. Health costs continue to rise and pensions are increasing year-on-year. Debt interest remains a heavy burden, only worsened by the rise in UK gilts since the beginning of March.

ONS (Office for National Statistics) data from before the Iran war shows the unemployment rate in the UK increased to 21% in the three months to February, up from 20.7%. Job vacancies fell to 711,000, the lowest in nearly five years, while payrolled employees decreased by 11,000 in March.

Nearly 90,000 serviced office spaces across England and Wales could be exposed to as much as £1.5bn in backdated tax bills. Labour’s changes to how business rates are assessed, which means shared office buildings are classed as separate units rather than a single establishment, could be backdated to April 2023 and valuers are able to backdate their assessments until 31 March 2027. Business rates specialist John Webber said the change amounted to a “tax grab” that will send most operators under. “If you are a single operator, it’s terminal,” he said, adding, “It is also preventing further investment in the sector, because people can no longer rely on business plans, they made based on what their outgoings will be and how they’ll be assessed.”

New data from the Ipsos Economic Optimism Index reveals that British optimism in the economy has fallen to its lowest level since records began. Some 78% of respondents expect the economy to worsen over the next year. Gideon Skinner, Ipsos’ senior director of UK politics, noted that public dissatisfaction has been entrenched for some time. He said: “Labour needs to convince the public that they can deliver a more optimistic outlook for the economy.”

Data published by the Insolvency Service shows personal insolvencies have surged 30% as debt relief orders hit their highest monthly total since their introduction in 2009. Alongside DROs, there were 7,075 IVAs and 654 bankruptcies recorded during the month, indicating continued pressure on household finances despite broader efforts to support debt restructuring. The sustained rise in personal insolvency is likely to fuel concerns about household resilience amid ongoing cost pressures and elevated borrowing costs. Giuseppe Parla, restructuring and insolvency director at Menzies LLP, said, “Ongoing tensions in the Middle East are driving up energy and fuel costs, disrupting supply chains, and keeping inflation stubbornly above the Bank of England’s 2% target.”

USA

In New York, the S&P 500 and Nasdaq indexes closed at record highs as investors hope for a restart to US-Iran talks. President Trump announced on Thursday that Israel and Lebanon agreed to extend their ceasefire by three weeks.

Intel shares soared 23.6% to log its best daily gain since October 1987. Nvidia stock closed at an all-time high, pushing its market capitalisation past the $5 trillion mark.

US jobless claims came in at 214,000, slightly above expectations. The four-week average held steady and in line with the narrow range seen over the past year. Continuing claims rose to 1.821 million, just above forecasts. Robust US economic resilience, highlighted by March retail sales rising 1.7% month on month, reduces the urgency for Federal Reserve rate cuts and reinforces the interest rate differential favouring dollar denominated assets.

Meta and Microsoft announced 20,000 job cuts between them, raising concerns that an AI-driven labour crisis is here. Meta is cutting 10% of its workforce and Microsoft announced that its offering employee buyouts to 7% of its US staff for the first time in its 51-year history.

Gallup’s Economic Confidence Index has dropped 11 points since March, reaching its lowest point since November 2023, when the Biden administration was grappling with stubborn inflation as Americans have grown more pessimistic about the US economy in the weeks since the US-Israel war with Iran began. 47% of US adults say the current economic conditions are poor, while only 21% call them excellent or good. And there’s little optimism about the future with 73% saying the economy is getting worse.

In a separate Gallup poll, the share of Americans who disapprove of the job that Congress is doing now stands at an all-time high as the partial government shutdown drags on. Fully 86% of US adults polled disapprove of Congress, the highest level since records began more than 50 years ago.

The EU

Germany cut its growth forecast for this year in half due to the conflict in the Middle East. Output is now expected to expand by just 0.5% in 2026, down from 1% previously. The Economy Ministry also revised down its outlook for next year, from 1.3% to 0.9%. Germany’s 500€ billion investment plans has yet to gain traction, with optimism around a meaningful economic recovery this year continuing to fade.

Vladimir Putin plans to shut the Druzhba pipeline within a fortnight, a move that will hurt European energy supplies by cutting Europe from Kazakh oil as it faces supply disruption caused by the Iran war. The planned closure poses a particular threat to Germany, where the Druzhba pipeline supplies 17% of the crude oil processed by PCK refinery, which provides 90% of the fuel used by Berlin’s cars. The PCK refinery sits 60 miles north-east of Berlin is also the biggest supplier of kerosene and heating fuel to Berlin and its airport.

Cracks continue to appear in the climate consensus as Germany’s Energy Minister admits that renewable energy is ruining the country. In a guest column for the Frankfurter Allgemeine Zeitung, Katherina Reiche delivered a verdict that would have been career-ending heresy only a year ago, “One fact has been concealed for too long: an energy transition that ignores system costs will ruin the country it claims to save.”

The French government will drop Microsoft Windows from its 2.5 million government workstations and turn to Linux amid growing European concern about reliance on US tech.

In 2025, Portugal surpassed Italy in total vehicle manufacturing volume, marking a significant milestone for the national industry. With production exceeding 341,000 units, including passenger cars, commercial vehicles, and heavy vehicles, Portugal rose to ninth place in the European ranking. This success is driven by an export-oriented growth model, with exports accounting for 97.8% of total production. Vehicles assembled in Portugal are primarily shipped to Germany, France, Spain, and Italy, underscoring the country’s strategic role in global value chains.

Others

China enacted new rules that threaten stiff punishments for foreign and domestic companies that shift supply chains out of China, with penalties including “exit bans” on staff, asset seizures, and visa controls. The move reflects anxiety among policymakers as growing numbers of manufacturers shift production to places like India and Vietnam amid mounting geopolitical strains with the US and the EU.

A surge of exports ahead of the war in Iran boosted China’s GDP growth to 5% in the first quarter, even as other indicators pointed to the country’s economic vulnerabilities. Roughly 40% of growth came from exports, with semiconductor sales up a staggering 77.5%. But China’s domestic growth remained sluggish, dragged down by a weak property market and high youth unemployment, leaving the economy vulnerable to slowing global demand amid rising energy prices and supply chain disruptions.

China is reviving some dormant coal plants as it looks to further boost its energy independence, a move that threatens to roll back some of the country’s progress in greening its grid.

Australian business activity picked up slightly in April, pushing the economy back into mild growth. Services bounced back and manufacturing expanded, though weaker factory output limited the overall lift. Total new business fell for a second straight month, highlighting ongoing caution at home. Supply chains came under strain as the Middle East conflict pushed fuel and freight costs higher. Delivery times stretched to their longest since July 2022. As a result, business costs rose at the fastest pace since August 2022, prompting companies to lift selling prices to near four-year highs.

The latest NZIER survey reveals New Zealand’s business confidence has plunged to its lowest level since mid-2024 and the BusinessNZ PMI slipped to a four-month low of 53.2, still signalling expansion, but at a slower pace.

Dubai plans to build a 26-mile metro line costing more than $9 billion, providing a major economic stimulus as the emirate tries to shake off the impact of the Iran war. The all-underground Gold Line is Dubai’s largest transport project to date and is scheduled to be completed by September 2032.

Goldman Sachs says Oman and Saudi Arabia can expect a windfall from higher oil prices due to the Iran war and the effective closure of the Strait of Hormuz. Oman, with all its ports outside the Gulf has been unaffected while Saudi has been able to direct exports via its western ports. But revenues have dropped in Bahrain, Kuwait, Qatar, and the UAE.

Data from the IREA (International Renewable Energy Agency) shows Saudi Arabia nearly doubled its renewable energy capacity in 2025. The kingdom was able to produce 12,332 megawatts at the end of 2025, up 87% from the year before. Almost all of that increase came from solar power. However, while the pace of new projects is accelerating, the kingdom is still some way off its target of producing 50% of electricity from renewables by 2030. In 2025, renewable energy made up 12% of total electricity production.

South Africa made it easier for investors to move money out of the country by scrapping the pre-approval process, a system put in place more than 60 years ago to prevent apartheid-era capital flight.

Officials at the South African Reserve Bank and National Treasury described the new approach as a “positive bias” system, one that allows capital, including crypto, to move across borders unless flagged as high risk. Authorities hope the redesign will boost foreign investment, the cornerstone of South African President Cyril Ramaphosa’s economic revival plan that has increased the influx of private capital into energy, water, and logistics infrastructure. His administration is canvassing investors for 3 trillion rand, much of which would flow to infrastructure upgrades in the network industries.

Taiwan’s stock market surpassed the UKs in total value on the back of bumper demand for AI chips. TSMC, the world’s largest contract chipmaker, accounts for more than 40% of the island’s bourse; it reported record first-quarter earnings last week and forecast full-year revenue could increase by more than 30%.

Stranger than fiction

Honor, a Chinese smartphone manufacturer won the half-marathon race for robots in Beijing, with its bot wrapping the 13 miles in 50 minutes and 26 seconds. That’s faster than Jacob Kiplimo, who holds the world record for finishing in ~57 minutes, and faster than last year’s winning bot, which finished in 2 hours, 40 minutes, and 42 seconds.

Researchers in Saudi Arabia have figured out how to turn date pits into artificial bones. Sali Al-Harbi, from Al Qassim, the kingdom’s date heartland, discovered that the pits share enough in common with human bone (in terms of calcium, structure, and density) that they could plausibly be used in fracture repair and reconstruction. This is part of a broader push by the kingdom to build a homegrown biomedical research industry, with R&D spending jumping 30% to 25 billion riyals ($7.86 billion) in 2024. To test the date idea, Al-Harbi tried it on rabbits, and early results were encouraging.

Voyager 1, the most distant man-made object from Earth, shut down one of its three remaining instruments as NASA worked to extend its near-half-century mission. The Voyager probes launched in 1977 toward the solar system’s outer planets, a planned five-year job. But they have continued to function in the decades since, slowly cutting down capabilities as their nuclear batteries dwindle. They are now in interstellar space. Voyager 1, the most distant, is 15.8 billion miles away, and radio signals from Earth take almost 24 hours to reach it. But space is big: If it were heading in the right direction, which it isn’t, Voyager 1 would take a further 70,000 years to reach our nearest stellar neighbour.

Quote

Winston Churchill, “Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time”.