Summary

• The UK is now around 40% poorer per person than the US, having
  been on course for near economic parity as recently as 2007. If it
  were a US state, the UK would be the poorest in the union, ranked
  below Mississippi.


• Britain has not always been outpaced by the US. Between 1955
  and 2008, the UK experienced an annual trend rate of real growth
  per person of 2.3%, slightly faster than the US at 2.1%.


• After the Global Financial Crisis, the US suffered a drop in the level
  of economic activity but then essentially returned to trend growth.
  In contrast, the UK experienced both a sharp drop in the level of
  economic activity and a decline in the subsequent rate of
  economic growth.


• Austerity cannot explain the UK’s underperformance: the US
  pursued a similar policy over the same period.


• The real cause was post-2009 banking regulation, which required
  banks to substitute perceived low-risk lending to governments for
  lending to business.


• The effects of regulation fell disproportionately on the UK’s bankdependent economy, and undermined lending to small and
  medium-sized businesses, inhibiting their ability to grow. The US
  was less affected due to its greater reliance on non-bank credit
  and the abundance of small banks subject to fewer regulatory
  requirements.


• Whereas US lending to non-financial businesses recovered by
  mid-2013, in the UK bank lending remains 15% below its early
  2008 level.