Britain’s New Economic Policy: Get Used to Being Worse Off

Britain has been experiencing a cost-of-living crisis since the Brexit in 2020. Today, the situation is no different with persistent inflation, low growth, and debt now revealing signs of economic stagnation.

The UK’s growth in GDP-per capita (often used as a proxy indicator of a country’s standard of living) continues to lag that of almost all G7 nations. The response two years ago from the British government to this malaise (termed the “British disease” in the ‘70s) was  — just accept it — apparently, they have.

Bank of England chief economist Huw Pill seems to have adopted the “Marie Antoinette” approach in his advice to the people of Britain: they must “accept that they are poorer”; otherwise, inflation will stay persistent. 

The chief economist, who earns £180,000 ($225,000) per year by the way, complained that people and businesses have responded to higher bills and costs by asking for higher wages or charging their customers more money. How dare they!

Speaking at an event at Columbia Law School, Mr. Pill said at the time: “The UK, which is a big net importer of natural gas, is facing a situation where the price of what you’re buying from the rest of the world has gone up a lot, relative to the price of what you’re selling to the rest of the world, which is mainly services in the case of the UK.”

“So, somehow in the UK, someone needs to accept that they’re worse off, and stop trying to maintain their real spending power by bidding up prices whether through higher wages or passing energy costs on to customers.”

Fast forward to today: Over just this past month, food prices have risen by 5.2 percent compared to last year and will likely accelerate to 6.0 percent by year’s end.

On average, UK households spend around £5,283 ($7,135) a year on groceries, and this will likely increase by £275 ($371) unless people change what they buy.

The U.S. consumer spends roughly $6,224 per year on food — almost $1,000 less.

A pattern seems to have developed: back in 2022, Bank of England governor, Andrew Bailey, faced severe criticism after urging workers not to seek a significant pay increase because it fuels inflation — which was running at over 10 percent at the time.

At 3.2 percent currently, it is below the 11.1 percent figure reached in October 2022 — a 40 year high — but continues well above the Bank of England’s target of 2.0 percent. The Trump administration just reported a CPI figure of 2.7 percent.

Britain’s long-running cost-of-living crisis is no longer viewed as a temporary shock but rather a structural decline, according to a stark new forecast from the Centre for Economics and Business Research (CEBR). The UK-based think tank warns that high inflation, weak growth, and mounting debt are steadily eroding living standards, leaving British households poorer than before the Covid-19 pandemic and pushing the country down the global economic rankings. Far from regaining lost ground, the UK is now expected to fall further behind most of its G7 peers over the coming decade. 

CEBR’s World Economic League Table, released on December 26, paints a sobering picture. The report projects that the UK will slip from 19th to 22nd place in global GDP per capita rankings by 2030, overtaken by economies such as Hong Kong, Finland, and the United Arab Emirates. Even more striking is the longer-term outlook: by 2035, British living standards are forecast to fall behind those of Malta, a former colony with a fraction of the UK’s population and economic heft. 

In dollar terms, GDP per capita is expected to reach just $58,775 next year, a figure that underlines how limited growth in income has become for the average Briton. The figure for the U.S. is $89,599 – a 4.0 percent increase from last year.

What makes the forecast particularly troubling is Britain’s weak performance relative to its closest competitors. According to CEBR, the UK’s GDP per capita growth over the next five years will be the second weakest in the G7, ahead of only Japan. This is not a case of global stagnation dragging Britain down; rather, it reflects domestic vulnerabilities that other advanced economies have been more successful at managing. While countries such as the United States and parts of Europe have seen stronger productivity rebounds and wage growth, the UK remains ensconced in a low-growth cycle. 

CEBR economist Pushpin Singh describes Britain’s predicament as high inflation, high debt, and low growth — with each element reinforcing the others. Persistent inflation has eroded purchasing power, especially for lower- and middle-income households, while high public debt constrains the government’s ability to stimulate the economy without resorting to tax increases. 

Singh notes that the UK’s economic performance increasingly resembles France rather than the United States, particularly in productivity and public spending.

“UK welfare spending is still not as bad as France. But are we on the road there? I think so in terms of elevated welfare spending, tax receipts not being enough [to compensate], and … the NHS and other civil service sector spending.”

The report noted that the UK economy grew by just 1.4 percent in 2025 and projected an average annual growth rate next year of around 1.5 percent — well below what would be needed to meaningfully raise living standards or close the gap with peer economies.

Singh warned the outlook remains “very much skewed to the downside,” adding that Britain was in some ways “still very much living off its past glories.” 

A stark contrast emerges between the UK and the U.S. in post-pandemic productivity performance.

While American productivity has been “off the charts” since COVID-19 according to Singh, Britain continues to struggle with productivity growth.

The report suggests an emerging divergence between UK and American economic models, with Britain’s trajectory more closely aligning with European welfare-state approaches despite historical ties to U.S.-style capitalism.

The risk for Britain is not just falling further in the global rankings, but settling into a new normal of diminished economic ambition and reduced prosperity for its people — an outcome that would have seemed unthinkable for one of the world’s richest nations only a generation ago.

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