Why Britain Stopped Growing

On the tenth anniversary of the Brexit vote and amid Britain’s seventh prime minister in ten years, economist Paul Johnson diagnoses two decades of stalled growth, GQG’s Brian Kersmanc reads a higher floor under oil after the Strait of Hormuz scare, and Ed Elson argues that American tariffs are ‘America’s Brexit’.

Key ideas

1. The doom loop of stagnation. Average earnings in Britain are roughly where they sat 20 years ago — a stall Paul Johnson calls unparalleled in perhaps 200 years. A poorer-feeling electorate turns fed up, fed-up voters produce chaotic politics, chaotic politics cannot deliver the stable policy that growth needs, and weak growth feeds the resentment again. Seven prime ministers in a decade is the political symptom of that spiral.
2. Brexit plus a stack of self-inflicted constraints. The 2008 financial crisis hit Britain unusually hard given London’s large financial sector; Brexit and the post-2016 uncertainty cut a few percentage points off growth. Layered on top are poor domestic choices — a planning system that makes it ‘very hard to build stuff’, an over-complicated tax system, and weaknesses in education. Much of Europe is struggling; Britain is struggling more.
3. Technocrats know the fixes; politicians won’t touch them. The well-worn remedies — tax reform, easier building, shifting spend from welfare to investment — each create visible losers in the short term, so leaders avoid them as electorally fatal. Johnson is candid that the next likely PM, Andy Burnham, has said so little about economic policy that his actual programme is unknown.
4. A higher floor under oil. Brian Kersmanc of GQG argues the expected 2026 supply glut is gone and a risk premium is now permanent after the Strait of Hormuz disruption. Prices sit in the high $70s only because inventories are being drawn down — Cushing near tank-bottoms around 20 million barrels — and buyers wait, betting the squeeze is transitory. If it isn’t, physical prices climb and inflation pressure feeds through to rates.
5. ‘Tariffs are America’s Brexit.’ Ed Elson closes by reading Brexit as a case study in how not to run a modern economy — GDP per capita as much as 8% lower, business investment as much as 18% lower than a no-Brexit path — and warns that US tariffs share the same preconditions and arguments: raise barriers, cut trade, in the name of national pride. His bet is the same outcome.

Related

• Ed Elson — host
• Paul Johnson — guest; stalled-growth diagnosis
• Brian Kersmanc — guest; oil and the risk premium
• What Makes Economies Grow — theme