Why has UK economic growth been so much slower than USA since 2008, & than our normal rate before then too? According to new work from international economist Tyler Goodspeed in a lecture for the Institute of Economic Affairs this week, it isn’t the usual suspects like sclerotic planning throttling housebuilding & new infrastructure; or expensive energy killing UK manufacturing; or pricey & inflexible childcare are keeping people away from work.
Those were all around for years before 2008, so what changed after the 2008 banking crash? The answer is that our bank lending didn’t recover after 2008, whereas USA’s has. In other words, the UK credit crunch is still going, 16 years later. No wonder UK growth is so anaemic.
This means our post-2008 banking rules, designed to prevent another financial crash in future, are throttling our economy while the USA equivalent versions (introduced at the same time & for the same reasons) aren’t.
Regulators at the Bank of England & officials working for Chancellor Rachel Reeves need to figure out why the USA rules are so much better than ours, & fix them pronto. If USA can have safe banking & still grow fast, why can’t we?
If Tyler Goodspeed is right, this ought to be right at the top of the Government’s economic in-tray. It could fix a lot (although not all) UK slow growth problems safely & quickly.
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