The UK is no longer a rich country after 15 years of economic stagnation and falling living standards, according to new research.
A report from the National Institute of Economic and Social Research (NIESR) revealed that parts of Britain are now worse off than the poorest areas of Lithuania and Slovenia — countries that have seen strong growth in recent decades.
Since the 2008 financial crisis, the UK’s economic growth and productivity have lagged behind other major economies. If British productivity and wages had matched US levels, the average UK worker would be £4,000 a year better off.
‘Stagnation is threatening the UK’s status’
Max Mosley, an economist at NIESR, warned that years of weak productivity and wage growth, combined with cuts to welfare, have left the UK in a precarious position.
“Economic stagnation over the past decade is now threatening the UK’s position as a place for a high standard of living,” Mosley said.
“We’re neither delivering prosperity through high wages nor security through welfare. The fact that the poorest in our country are now worse off than those in nations once considered less affluent is a stark indictment of the UK’s economic model.”
Mosley added that the question of whether Britain remains a rich country is now “less straightforward” after centuries of easy answers.
Real earnings barely rising
The numbers paint a bleak picture. Since 2019, real earnings for British workers have risen by less than 3% when adjusted for inflation. Since the 2007 financial crisis, they’ve increased by just 6.6%.
For comparison, from 2000 to 2007, real earnings rose by nearly 20%.
Adrian Pabst, NIESR’s deputy director, described it as a “dramatic collapse” in the living standards of the poorest 40% of society.
“The government’s mission to grow the economy isn’t just about headline figures — it’s about raising living standards for everyone,” Pabst said. “Public investment needs to unlock business investment to drive up productivity and wages.”
What needs to change
NIESR has called on the government to raise the income tax threshold and scrap the two-child benefit limit as cost-effective ways to lift people out of poverty.
“After more than 15 years of real wage stagnation, working families need to see a tangible improvement in their living standards during this parliament,” Pabst added.
Government response
An HM Treasury spokesperson defended the government’s record, pointing to rising real wages and the increased National Living Wage.
“This government inherited the worst living standards growth since ONS records began, but we’re focused on putting more money in people’s pockets,” the spokesperson said.
They highlighted three recent interest rate cuts, a record increase in the National Living Wage, and the Triple Lock on pensions, which could see state pensions rise by up to £1,900 during this parliament.
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