Whoever wins the British election on July 4 will have the economy stuck in a cycle of slow growth and high levels of debt that will limit the government's ability to trigger a meaningful recovery.
After the blow of the global financial crisis between 2007 and 2009, the world's sixth largest economy has been hit by the decision to leave the European Union in 2016, the Covid-19 pandemic and rising energy and food prices in 2022.
The UK's economic performance has been the weakest of the G7 economies since the coronavirus crisis, with the exception of Germany, which was hit hard by rising energy prices following Russia's invasion of Ukraine.
The country's inability to keep pace with its peers in terms of productivity growth contributed to a gap in living standards compared to other European countries.
Median earners in the UK are 20% poorer than their counterparts in Germany and 9% in France, according to research by the Resolution Foundation, the Center for Economic Performance and the Nuffield Foundation.
British Prime Minister Rishi Sunak, struggling to reverse a huge deficit in opinion polls, has sought to cheer voters by saying the economy is turning a corner after a brief and shallow recession in the second half of last year.
In a speech announcing the election, Sunak cited inflation falling to nearly 2% in 2022, according to data released Wednesday — from a peak of more than 11% in 2022 — as evidence that his plans are working.
“Economic stability is always the beginning,” he said. “The question now is how and who you trust to make this foundation a secure future for you, your family and our country.”
Gross domestic product (GDP) grew in the first quarter of 2024 and a drop in inflation opened the door to the Bank of England cutting interest rates for the first time since 2020.
But the recovery looks set to stall. The International Monetary Fund (IMF) this week forecast growth of 0.7% in 2024 and 1.5% in 2025, down from an average of 2.75% before the global financial crisis.
The main opposition and poll-leading Labor Party blames Sunak's Conservatives for the first drop in living standards between one national election and another since at least the 1950s.
Labor leader Keir Starmer says he will make Britain the fastest-growing economy in the G7 by attracting private investment, which he says has been held back by political turmoil since the Brexit vote under the Conservatives.
In 2022, British business investment was below its 2016 level, in contrast to other G7 economies which saw an average increase of 14% over the period.
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