A decade on from the financial crisis, the UK economy is now comparatively smaller than the United States was 10 years on from the Great Depression.
Analysis by Sky News of the paths of different recessions throughout UK and US history has found that the UK’s recovery is now comparatively weaker than the American recovery after the Wall Street Crash of 1929.
The UK economy is now 10.8% bigger than it was at the start of the crisis, 42 quarters or 10 and a half years ago.
But while Britain’s recent recession was nowhere near as deep as the Great Depression, where gross domestic product contracted at one stage by 26% (the UK’s slump never exceeded 6%) America’s recovery in the late 1930s means its path has now overtaken Britain’s. At this stage in its recovery, the US economy was around 12.6% bigger than it was in 1929.
The stark comparison underlines how slow the UK recovery has been in the years following 2008. While in most previous recessions the UK bounced back to previous rates of growth, following the financial crisis, trend growth rates have remained weak.
The statistic is the latest evidence of the unprecedented historical nature of the past decade, and stands alongside others showing the longest period of falling real wages and productivity in two centuries. It comes amid growing consternation about the length of time it has taken for the UK to regain economic momentum.
While some blame austerity and government cuts, others think the collapse of the financial system is partly responsible. There are others, too, who think the explanation is weak productivity, which has contributed to low wages and slow gross domestic product expansion.
Either way, there are many, even among the establishment, who wonder whether the economic system is working as it should. In his party conference speech last week, Chancellor Philip Hammond acknowledged that “too many people have experienced years of slow wage growth… And as they look around them, they feel a growing concern that they are falling behind, and that when they voice those concerns the political system doesn’t seem to hear them.”
Speaking to Sky News, the former head of the CBI and the Financial Services Authority, Lord Adair Turner, said: “The capitalist system is not delivering for ordinary people in the way it seemed to be doing before 2007.
“And that’s the crisis which I think is still unresolved. I think people are legitimately angry about it.
“Something has gone deeply wrong with capitalism.
“From 1948 to 2008 even though there were some ups and downs, some tricky periods back in the 1970s, you would find that in every one of those decades real GDP and real wages increased materially. So almost everybody participated in a growth of the economy.
“That deal has broken down. We have a whole load of people who in 2018 have real wages which are below where they were in 2007.”