More needs to be done to reboot the economy, says IEA Fellow
13 January 2023
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Commenting on November’s GDP figures, Julian Jessop, Economics Fellow at the Institute of Economic Affairs, said:
“It is only two weeks into 2023, but the gloomy consensus that the UK is now in the deepest and longest recession of any major economy has already started to unravel.
“The marginal 0.1% rise in GDP in November, on top of the 0.5% rebound in October, means that the UK probably avoided a second successive quarter of falling output in the final three months of last year.
“The strikes will have hit activity in December, but the latest consumer and business surveys are generally reassuring. Inflation should tumble this year and interest rates do not need to rise much further, if at all.
“But this is little to cheer. The bigger picture is that growth should be much stronger. UK GDP and total employment are still both lower than before the pandemic, so there is plenty of headroom.
“The ‘two successive quarters’ definition of recession is also arbitrary. Small changes either way in headline GDP mean nothing to the many households struggling to pay their bills.
“An awful lot more therefore needs to be done to reboot the economy. This should include a coherent package of supply-side reforms and other measures to make work pay and to boost productivity, which is the key to long-term growth and higher real wages.
“It is worth noting too that the reversal of the 1.25% rise in National Insurance rates for both employees and employers took effect from 6th November, which will have helped. From now on, taxes only look likely to rise, adding to the burden on households and businesses.”
ENDS
Notes to editors
Contact: media@iea.org.uk / 07763 365520
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.
“It is only two weeks into 2023, but the gloomy consensus that the UK is now in the deepest and longest recession of any major economy has already started to unravel.
“The marginal 0.1% rise in GDP in November, on top of the 0.5% rebound in October, means that the UK probably avoided a second successive quarter of falling output in the final three months of last year.
“The strikes will have hit activity in December, but the latest consumer and business surveys are generally reassuring. Inflation should tumble this year and interest rates do not need to rise much further, if at all.
“But this is little to cheer. The bigger picture is that growth should be much stronger. UK GDP and total employment are still both lower than before the pandemic, so there is plenty of headroom.
“The ‘two successive quarters’ definition of recession is also arbitrary. Small changes either way in headline GDP mean nothing to the many households struggling to pay their bills.
“An awful lot more therefore needs to be done to reboot the economy. This should include a coherent package of supply-side reforms and other measures to make work pay and to boost productivity, which is the key to long-term growth and higher real wages.
“It is worth noting too that the reversal of the 1.25% rise in National Insurance rates for both employees and employers took effect from 6th November, which will have helped. From now on, taxes only look likely to rise, adding to the burden on households and businesses.”
ENDS
Notes to editors
Contact: media@iea.org.uk / 07763 365520
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.
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