Rachel Reeves humiliated as economy in ‘dire’ state – ‘worst slump since financial crash’
Rachel Reeves’s plans to boost the UK economy have hit a major problem as productivity has dropped to its lowest level since the 1970s. Productivity—how much the country produces for every hour of work—has been going down through the 2010s, and it’s dropped even faster in the 2020s.
A new report from the Resolution Foundation says this decline is nearly unheard of, with only the 2008 financial crisis seeing a similar fall in the past 50 years. It found that the country’s output per person has dropped by 0.5% between 2019 and 2024. That’s the worst it’s been since the 1970s, apart from the financial crash. This drop makes Reeves’s goal of growing the economy even harder, especially with rising borrowing costs, war in Europe, and growing trade tensions around the world.
The UK’s fall in productivity has been worse than most other wealthy G7 countries. Only the US has done better, mainly because of continued growth in oil and gas production.
Simon Pittaway from the Resolution Foundation said the UK already had weak productivity in the 2010s, but it’s gotten even worse in the 2020s. He said this helps explain why people’s living standards haven’t improved much.
The study used payroll data and a survey from the Office for National Statistics that looked at how many jobs there are in the UK.
The Resolution Foundation is urging the government to act quickly to turn things around. They said some positive steps have been made, like changes to planning rules and keeping up public investment.
However, they pointed out that other important areas are being ignored. They suggested changing the tax system to better support investment and fast-growing companies. For example, reducing the effect of taxes like non-residential stamp duty and changing the VAT threshold, as well as giving better tax support to new, high-growth firms instead of small businesses.
They also said that increasing trade could help turn things around.
Among the G7 countries, only Italy has done worse than the UK in terms of productivity since the 2010s. The report warned that the UK now has both falling productivity and the biggest drop in working-age employment in the G7 since the pandemic began.
