This is what the UK’s stagnation looks like


by Richard Exell    
9:25 am - October 24th 2012

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Following on from Duncan’s excellent post yesterday on the UK’s weak recovery, new statistics from the Office for National Statistics confirm just how drawn-out and grinding stagnation has been so far.

These are further statistics from the Measuring National Well-being project – one of the Prime Minister’s pet projects and a relic of the time when he wanted to convince us he was a progressive too.

The latest figures reveal that Net National Income is now 13.2 per cent (one sixth) lower than it was just before the recession, much worse than the 7 % fall in GDP per capita.

Other figures from the same project, published earlier this month, show that real households’ disposable income per head has fallen 1.6 per cent since the pre-recession peak in the second quarter of 2008.

Real household disposable income is income from wages and salaries, pensions, benefits and other sources after taxation and NI contributions are deducted. Real household actual income is this plus the implied value of public services and this fell by 1.9 per cent in the same period.

But what I found particularly worrying were charts comparing what has happened since 2008 with previous recessions.

The data for real household actual income per head is limited to the 90s and the current recession:

Both series start with the figure for the pre-recession peak set at 100 and then each subsequent quarter as a proportion of that.

The chart for Net National Income per head is dire:

The fall is much worse in the current recession and, as the ONS report notes:

In the 1980s, NNI per head had recovered to its pre-recession value three years after the beginning of the recession. The equivalent recovery came earlier in the recession of the 1990s; it took two and a half years

This time, after more than four years we are still in a worse position than at the Q5 recession trough.

This is stagnation, and it’s a problem that is not going to go away quickly.

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About the author
Richard is an regular contributor. He is the TUC’s Senior Policy Officer covering social security, tax credits and labour market issues.
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Reader comments


1. Barrie J

I’d guess another round of QE?
What a brilliant governor of the Bank of England Merv’ has been.
What a hero.
What a foil to Gordon, Alistair and Gideon.
Control of inflation like no other.
What forecasting skills.
Such an authority in the City.
Merv’, hope you enjoy your truly fabulous pension fuelled retirement.
Because you’ve totally f#cked mine.

2. Bob B

Try this report in Wednesday’s FT of the recent speech by Sir Mervyn King, Govenor of the BoE, in Cardiff – it’s pretty bleak both about the diminished effectiveness of policy options to get the economy moving as well as about the time it will likely take to get Britain’s economy back on track:

“Sir Mervyn King has warned in a blunt assessment that Britain faces a prolonged economic adjustment”
http://www.ft.com/cms/s/0/1249dca8-1d28-11e2-abeb-00144feabdc0.html#axzz2AEbamIBT

By his analysis, the main stumbling block is that the banks are undercapitalised so they are very cautious about lending for fear of making loses.

3. Andy C

@Barrie J

I think you are aiming your anger in the wrong direction. The UK’s inflation figures have essentially nothing to do with QE because the key drivers aren’t domestic factors, they are external factors, outside of the BoE’s control.

The biggest problem with QE is not that it has been inflationary (it hasn’t, because the money hasn’t actually made it into general circulation – printing money does *not* increase inflation by itself, it actually has to be spent), it’s been where it has gone (i.e. the banks’ balance sheets).

If we didn’t have a blinkered ideologue as chancellor, QE would be exactly the right response, but it wouldn’t be given to banks, it would go to low and middle income workers in the form of tax cuts, and it would go on infrastructure spending, both of which would see a significant boost in demand, which is the one thing we really need right now.

For all the talk, Britain’s national debt is not even close to being a problem, it’s way below (%GDP) levels that we’ve been able to repay in the past.

4. bkdavies

Yes Milton Friedman is right never let the money supply shrink and you don’t have a banking crisis?

Therefore you don’t have any need for any economic degree. Just increase the total amount of money supply by 3%.

Have you heard of the shadow banking industry and how much debt the banks are really in?

Paid bloggers from who knows where trying to control the dialogue.

So how is the John Birch Society and Mont Pelerin Society members treating each other these days?

The Maragaret Thatcher lets give the country away to those who own the money supply and make all the plebs pay taxes to use basic services.

What did Adam Smith say would happen?


Reactions: Twitter, blogs
  1. Aitch

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  2. Jason Brickley

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  3. leftlinks

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  4. Richard Exell

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    This is what the UK’s stagnation looks like | Liberal Conspiracy http://t.co/47ml8sD3 via @libcon

  7. Caótica Economía

    This is what the UK’s stagnation looks like | Liberal Conspiracy http://t.co/47ml8sD3 via @libcon

  8. Emily T Murray

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  9. BevR

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  10. BevR

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  11. BevR

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