UK is doing poor job of keeping up with its peers

Many good foreign holidays raise the question, “why don’t we do it like this at home?” But this year I started to obsess about that idea. We’d gone to Germany – the Alps and the Black Forest – and everywhere I looked, I felt a twinge of envy. In the Alps, the village of Farchant (population 3,601) boasted a 50m swimming pool, a diving pool, a children’s pool and an assortment of slides. I wrote last week about the joys of Freiburg’s well-appointed trams, walkable cobbled streets and lively retail scene.

Then there are the rollercoasters. My son is going through a phase, which meant I visited England’s Alton Towers and Germany’s Europa-Park in quick succession.

The comparison made Alton Towers seem cramped and tatty, with extensive queues even on a damp Monday. Alton Towers will sell you, at a painful price, the ability to skip those queues. The concept of monetising queue-jumping appears not to have occurred to the Germans, where the car parks were convenient and the lines were shorter and more entertainingly staged.

The Rulantica water park next door was far more pleasant than any British alternative I’ve seen. It’s spectacular, clean and fun.

Your top stories on Thursday

---

Inside the early morning operation to move asylum seekers from Mount Street encampment

---

Hannah Daly: Batteries are vital to ending fossil fuel dependence

---

Dave Hannigan: Grotesque Tyson-Paul spectacle the very antithesis of a real sporting event

---

[ ‘A failure of British society’: Food bank use spirals as hunger becomes entrenched ]

[ London is no longer an economic Eden compared to Dublin, it just wears its faults more gracefully ]

The general impression I drew from my holiday in Germany? This is what prosperity looks like – and the UK doesn’t have it. It is perilous to draw conclusions from a brief visit to tourist hotspots. I might have formed a different impression from a wet October in Eisenhüttenstadt. And so I turned to the economic data for a sense of where the UK really stands.

I began by looking at the World Bank’s data for gross domestic product per capita, measured in “international 2017 dollars” – an imperfect but necessary attempt to adjust for the changing cost of living between countries and over time. In 2007, just before the financial crisis, the UK’s per capita output (in 2017 dollars) was a little over $44,000 (€40,000).

Above us, Germany was just over $47,000, behind Denmark at over $53,500. The US was at nearly $56,000. France was a whisker behind the UK, Slovenia lower at under $35,000 and Poland was at less than half the British level.

By 2022, US GDP per capita had grown by more than 15 per cent and Denmark’s by 11 per cent. Germany’s had grown 14 per cent and Slovenia was 21 per cent richer than in 2007. Poland had done even better with more than 70 per cent growth.

But the UK? Like France, the UK had barely moved at under $47,000. German living standards, which two decades ago were a schnitzel’s-width away, now seem a stretch. Maybe that gap will narrow again, as Germany is squeezed by high energy prices and competition from China. Still, it is no comfort if Germany stumbles. Meanwhile Slovenia’s GDP per capita is on course to overtake the UK’s within a few years, followed not long after by Poland.

The UK’s limp economic performance reflects a slow accumulation of disappointments. A finance-heavy economy suffered a steep recession in 2008 (blame Gordon Brown); a slow recovery (blame David Cameron); more economic damage from Covid-19 (blame Boris Johnson); and the economic trauma of Liz Truss (blame Liz Truss). As a backdrop to all this, the economic costs of Brexit are steadily accumulating (Theresa May can take her share of the blame here).

GDP per capita is not a satisfactory measure of human flourishing, but these dry figures reflect something quite real. Krishan Shah and Gregory Thwaites of the Resolution Foundation write that “the US, France and Germany are all around one-sixth more productive than the UK. But these uniform gaps in productivity translate to widely different gaps in median household incomes.”

France is no richer than the UK because the French use their productivity to work fewer hours and retire early; Americans are much richer but must endure longer hours and enjoy fewer services from the government.

[ UK government climbs down on post-Brexit product mark ]

[ Euro zone economic downturn deepened in July, business survey indicates ]

Societies make choices, but the options are better in a more productive country, in which citizens can enjoy longer retirements, longer holidays, more consumption and even more rollercoasters. A nation can also, with the right priorities and rules, enjoy the benefits of economic growth while emitting less carbon dioxide.

The free market commentator Sam Bowman argues that the UK needs to recognise who its peers really are: “the UK is now a lot more like Poland than it is like the US in terms of the kinds of growth it needs to do”.

He means the British are no longer at the technological frontier; rather than developing world-leading industries in order to grow, we just need to get the basics right: cheaper energy, cheaper houses and more investment. Like any emerging economy, we should aspire simply to catch up.

That is an exaggeration. In artificial intelligence, biomedicine and the creative arts, the UK still has some companies and sectors at or near the global cutting edge; we can still aim for economic leadership.

But overrating the UK’s economic power has become an excuse for self-inflicted injuries, such as leaving the EU’s single market. The UK has made several other basic policy mistakes over the past 15 years, from cutting spending and raising taxes in the wake of a deep recession, to insidious errors such as underinvestment in everything from hospital equipment to sewers, putting up endless obstacles to building new homes and chronically unpredictable policy. Getting the basics right seems worth a try.

Let’s not give up on the dream that the UK could be the next Denmark. But let’s not deny the possibility that if we can’t adopt some better policies, we’ll find ourselves gazing instead at Poland. – Copyright The Financial Times Limited 2023