The Labour government has cited Brexit as a key factor in the UK’s economic challenges, yet similar growth patterns across Western Europe suggest broader structural issues, argues Paul Ormerod in a recent analysis. While politicians like Bridget Phillipson have pointed to Brexit as a primary cause of stagnating youth unemployment and low growth, Ormerod contends that this explanation overlooks comparable economic struggles within the European Union itself.
Growth Patterns Across Western Europe
Ormerod notes that growth rates across major Western European economies have remained consistently low since 2016, with little divergence between the UK and its continental peers. France recorded an average annual growth rate of 1.2 per cent, the UK 1.1 per cent, and Germany and Italy 0.8 and 0.7 per cent respectively. In contrast, non-EU economies like the US, Canada, and Australia achieved around 2 per cent growth during the same period, highlighting a stark difference in economic performance.
He argues that these similarities point to shared underlying causes rather than Brexit-specific factors. While the UK’s departure from the EU marks a significant political shift, Ormerod emphasizes that the economic challenges are not unique to Britain. The commonality in sluggish growth across Western Europe suggests systemic issues that transcend national boundaries.
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The Productivity Puzzle
According to Ormerod, productivity growth—the primary driver of long-term living standards—has remained stagnant in the UK since Brexit, averaging 0.5 per cent annually. However, this rate mirrors the period between the 2008 financial crisis and the Brexit vote, indicating that the crisis, not Brexit, marked the beginning of sustained economic stagnation.
Ormerod’s analysis frames the post-crisis era as the true watershed in economic performance. The lack of a clear productivity boost post-Brexit challenges the notion that the UK’s economic woes are uniquely tied to its EU exit.
This perspective implies that attributing the UK’s economic struggles solely to Brexit oversimplifies the situation. The productivity slowdown is a symptom of deeper, shared challenges facing Western economies.
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Political Shifts Reflect Economic Discontent
Immigration is a factor, but stagnant living standards over 15 years have amplified discontent. Slow growth in France and Germany is not linked to Brexit, yet British politicians often attribute their struggles to it. Paul Ormerod, an Honorary Professor at the Alliance Business School at the University of Manchester, urges policymakers to abandon the comfort blanket and address real issues.
Political Consequences of Economic Stagnation
Stagnant growth has fueled political discontent across Western Europe, Ormerod observes. In Germany, the Christian Democratic Union (CDU) faces decline amid rising support for the Alternative für Deutschland (AfD), while France sees Marine Le Pen’s National Rally leading opinion polls ahead of the upcoming presidential election. These trends reflect voter dissatisfaction with traditional parties, driven by perceptions of economic stagnation and limited opportunities for younger generations.