Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-05T16:01:03.312Z Has data issue: false hasContentIssue false

UK Economic Growth since 2010: Is it as Bad as it Seems?

Published online by Cambridge University Press:  01 January 2020

Nicholas Crafts*
Affiliation:
University of Warwick

Abstract

This paper reviews UK supply-side policies since 2010 in terms of their impact on growth and considers medium-term growth prospects in the context of the puzzle of disappointing post-crisis TFP performance. It is argued that there is no reason to believe that growth prospects have deteriorated significantly compared with the pre-crisis period. Changes in policy under the Coalition government are unlikely to have made a big difference to growth potential. On the one hand, this means opportunities for radical reform have been ignored; on the other hand, there has been no repeat of the 1930s’ debacle.

Type
Research Articles
Copyright
Copyright © 2015 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

I thank Tim Hatton, Tim Leunig and Jonathan Portes for valuable advice and an anonymous referee for helpful comments which improved an earlier version of the paper. The usual disclaimer applies.

References

Alemani, E., Klein, C., Koske, I., Vitale, C. and Wanner, I. (2013), ‘New indicators of competition law and policy in 2013 for OECD and non-OECD countries’, OECD Economics Department Working Paper No. 1104.Google Scholar
Barnett, A., Batten, S., Chiu, A., Franklin, J. and Sebastiá-Barrel, M. (2014), ‘The UK productivity puzzle’, Bank of England Quarterly Bulletin, 54, pp. 114128.Google Scholar
Ben-David, D., Lumsdaine, R. and Papell, D.H. (2003), ‘Unit roots, postwar slowdowns and long-run growth: evidence from two structural breaks’, Empirical Economics, 28, pp. 303–19.CrossRefGoogle Scholar
Bilicka, K. and Devereux, M. (2012), CBT Corporate Tax Ranking 2012, Oxford, Centre for Business Taxation.Google Scholar
BIS (2012), Industrial Strategy: UK Sector Analysis.Google Scholar
Black, A. and Fraser, P. (2000), ‘International comparisons on stock-market short-termism: how different is the UK experience?’, The Manchester School, 68 (supplement), pp. 3850.CrossRefGoogle Scholar
Blundell, R., Crawford, C. and Jin, W. (2014), ‘What can wages and employment tell us about the UK's productivity puzzle?’, Economic Journal, 124, pp. 377407.CrossRefGoogle Scholar
Bond, S.R. and Guceri, I. (2012), ‘Trends in UK BERD after the introduction of R & D tax credits’, Oxford University Centre for Business Taxation Working Paper No. 12/01.Google Scholar
Bond, S.R., Harhoff, D. and Van Reenen, J. (2003), ‘Investment, r and d and financial performance’, London School of Economics Centre for Economic Performance Discussion Paper No. 595.Google Scholar
Bourles, R. and Cette, G. (2007), ‘Trends in ‘structural’ productivity levels in the major industrialized countries’, Economics Letters, 95, pp. 151–6.CrossRefGoogle Scholar
Buccirossi, P., Clari, L., Duso, T., Spagnolo, G. and Vitale, C. (2013), ‘Competition policy and economic growth: an empirical assessment’, Review of Economics and Statistics, 95, pp. 1324–36.CrossRefGoogle Scholar
Byrne, D., Oliner, S. and Sichel, D. (2013), ‘Is the information technology revolution over?’, International Productivity Monitor, 25, pp. 2036.Google Scholar
Caballero, R.J., Cowan, K.N., Engel, E.M. and Micco, A.M. (2013), ‘Effective labor regulation and microeconomic flexibility’, Journal of Development Economics, 101, pp. 92104.CrossRefGoogle Scholar
Cette, G. and Lopez, J. (2012), ‘ICT demand behaviour: an international comparison’, Economics of Innovation and New Technology, 21, pp. 397410.CrossRefGoogle Scholar
Cheshire, P.C. and Hilber, C.A.L. (2008), ‘Office space supply restrictions in Britain: the political economy of market revenge’, Economic Journal, 118, pp. F185F221.CrossRefGoogle Scholar
Cheshire, P.C., Hilber, C.A.L. and Kaplanis, I. (2015), ‘Land-use regulation and productivity – land matters: evidence from a UK supermarket chain’, Journal of Economic Geography, 22, pp. 4373.CrossRefGoogle Scholar
Cheshire, P. and Sheppard, S. (2005), ‘The introduction of price signals into land-use planning: a proposal’, Urban Studies, 42, pp. 647–63.CrossRefGoogle Scholar
Crafts, N. (2012a), ‘Creating competitive advantage: policy lessons from history’, in Greenaway, D. (ed.), The UK in a Global World, London, CEPR Press, pp. 735.Google Scholar
Crafts, N. (2012b), ‘British relative economic decline revisited: the role of competition’, Explorations in Economic History, 49, pp. 1729.CrossRefGoogle Scholar
Davies, R., Haldane, A.G., Nielsen, M. and Pezzini, S. (2014), ‘Measuring the costs of short-termism’, Journal of Financial Stability, 12, pp. 1625.CrossRefGoogle Scholar
Eddington, R. (2006), The Eddington Transport Study, London, The Stationery Office.Google Scholar
EU KLEMS (2011), Growth and Productivity Accounts, http://euklems.net/Google Scholar
Evenett, S.J. (2014), The Global Trade Disorder, London, CEPR Press.Google Scholar
Fernald, J. (2014), ‘Productivity and potential output before, during and after the great recession’, NBER Working Paper No. 20248.Google Scholar
Flyvberg, B. (2009), ‘Survival of the unfittest: why the worst infrastructure gets built – and what we can do about it’, Oxford Review of Economic Policy, 25, pp. 344–67.Google Scholar
Foreman-Peck, J. (2013), ‘Effectiveness and efficiency of SME innovation policy’, Small Business Economics, 41, pp. 5570.CrossRefGoogle Scholar
Foresight (2013), The Future of Manufacturing: a New Era of Opportunity and Challenge for the UK, London, Government Office for Science.Google Scholar
Frontier Economics (2014), Rates of Return to Investment in Science and Innovation, London.Google Scholar
Glaister, S. (2002), ‘UK transport policy, 1997–2001’, Oxford Review of Economic Policy, 18, pp. 154–86.CrossRefGoogle Scholar
Glaister, S. and Smith, J.W. (2009), ‘Roads: a utility in need of a strategy’, Oxford Review of Economic Policy, 25, pp. 368–90.CrossRefGoogle Scholar
Gordon, R.J. (2014), ‘The demise of U.S. economic growth: restatement, rebuttal, and reflections’, NBER Working Paper No. 19895.Google Scholar
Graham, C. (2012), ‘The reform of UK competition policy’, European Competition Journal, 8, pp. 539–62.CrossRefGoogle Scholar
Griffith, R. and Miller, H. (2011), ‘Corporate taxes and intellectual property’, in Brewer, M., Emmerson, C. and Miller, H. (eds), The IFS Green Budget 2011, London, Institute for Fiscal Studies, pp. 223–41.Google Scholar
Griffith, R., Redding, S. and van Reenen, J. (2001), ‘Measuring the cost-effectiveness of an R&D tax credit for the UK’, Fiscal Studies, 22, pp. 375–99.Google Scholar
Hall, P.A. and Soskice, D. (2001), ‘An introduction to varieties of capitalism’, in Hall, P.A. and Soskice, D. (eds), Varieties of Capitalism, Oxford, Oxford University Press, pp. 168.CrossRefGoogle Scholar
Haskel, J. and Wallis, G. (2013), ‘Public support for innovation, intangible investment and productivity growth in the UK market sector’, Economics Letters, 119, pp. 195–8.CrossRefGoogle Scholar
Hanushek, E.A. and Woessmann, L. (2012), ‘Do better schools lead to more growth? Cognitive skills, economic outcomes, and education’, Journal of Economic Growth, 17, pp. 267321.CrossRefGoogle Scholar
HM Treasury and BIS (2011), The Plan for Growth, London.Google Scholar
Hughes, A. (2013), ‘Short-termism, impatient capital and finance for manufacturing innovation in the UK’, Future of Manufacturing Project Evidence Paper No. 16.Google Scholar
IMF (2009), World Economic Outlook.Google Scholar
Johansson, A., Heady, C., Arnold, J., Brys, B. and Vartis, L. (2008), ‘Taxation and economic growth’, OECD Economics Department Working Paper No. 620.Google Scholar
Johnson, P. (2014), ‘Tax without design: recent developments in UK tax policy’, Fiscal Studies, 35, pp. 243–73.CrossRefGoogle Scholar
Kamps, C. (2005a), ‘The dynamic effects of public capital: VAR evidence for 22 OECD countries’, International Tax and Public Finance, 12, pp. 533–58.CrossRefGoogle Scholar
Kamps, C. (2005b), ‘Is there a lack of public capital in the European Union?’, EIB Papers, 10(1), pp. 7393.Google Scholar
Kay, J.A. (2012), The Kay Review of UK Equity Markets and Long-Term Decision-Making, London, The Stationery Office.Google Scholar
Leunig, T. and Overman, H. (2008), ‘Spatial patterns of development and the British housing market’, Oxford Review of Economic Policy, 24, pp. 5978.CrossRefGoogle Scholar
LSE Growth Commission (2013), Investing in Prosperity: Skills, Infrastructure and Innovation, London, London School of Economics.Google Scholar
Maddison, A. (2010), Historical Statistics of the World Economy, 1-2008AD, http://www.ggdc.net/maddison.Google Scholar
Migration Advisory Committee (2010), Limits on Migration: Limits on Tier 1 and Tier 2 for 2011/12 and Supporting Policies, London, The Stationery Office.Google Scholar
Miles, D. (1993), ‘Testing for short-termism in the UK stock market’, Economic Journal, 103, pp. 1379–96.CrossRefGoogle Scholar
Mirrlees, J., Adam, S., Besley, T., Blundell, R., Bond, S., Chote, R., Gammie, M., Johnson, P., Myles, G. and Poterba, J. (2011), ‘The Mirrlees Review: conclusions and recommendations for reform’, Fiscal Studies, 32, pp. 331–59.CrossRefGoogle Scholar
Mokyr, J. (2014), ‘Secular stagnation? Not in your life’, in Teulings, C. and Baldwin, R. (eds), Secular Stagnation: Facts, Causes and Cures, London, CEPR Press, pp. 83–9.Google Scholar
Murray, J. (2014), ‘Output gap measurement: judgement and uncertainty’, Office for Budget Responsibility Working Paper No. 5.Google Scholar
Newbery, D. (2005), ‘Road user and congestion charges’, in Cnossen, S. (ed.), Theory and Practice of Excise Taxation, Oxford, Oxford University Press, pp. 197233.Google Scholar
Nicoletti, G. and Scarpetta, S. (2005), ‘Regulation and economic performance: product market reforms and productivity in the OECD’, OECD Economics Department Working Paper No. 460.Google Scholar
Office for Budget Responsibility (2011), Economic and Fiscal Outlook.Google Scholar
Office for Budget Responsibility (2014a), Economic and Fiscal Outlook.Google Scholar
Office for Budget Responsibility (2014b), Fiscal Sustainability Report.Google Scholar
OECD (2014a), Economic Outlook.Google Scholar
OECD (2014b), Main Science and Technology Indicators.Google Scholar
Ollivaud, P. and Turner, D. (2014), ‘The effect of the financial crisis on OECD potential output’, OECD Economics Department Working Paper No. 1166.Google Scholar
Oulton, N. (2012), ‘Long-term implications of the ICT revolution: applying the lessons of growth theory and growth accounting’, Economic Modeling, 29, pp. 1722–36.CrossRefGoogle Scholar
Oulton, N. (2013a), ‘Has the growth of real GDP in the UK been overstated because of mismeasurement of banking output?’, National Institute Economic Review, 224, pp. R5965.CrossRefGoogle Scholar
Oulton, N. (2013b), ‘Medium and long run prospects for UK growth in the aftermath of the financial crisis’, London School of Economics Centre for Economic Performance Occasional Paper No. 37.Google Scholar
Pessoa, J.P. and Van Reenen, J. (2014), ‘The UK productivity and jobs puzzle: does the answer lie in wage flexibility?’, Economic Journal, 124, pp. 433–52.CrossRefGoogle Scholar
Rhodes, C. (2014), ‘Industrial policy since 2010’, House of Commons Library Standard Note, SN/EP/6857.Google Scholar
Rice, P., Venables, A.J. and Patacchini, E. (2006), ‘Spatial determinants of productivity: analysis for the regions of the UK’, Regional Science and Urban Economics, 36, pp. 727–52.CrossRefGoogle Scholar
Rolfe, H., Rienzo, C., Lalani, M. and Portes, J. (2013), Migration and Productivity: Employers’ Practices, Public Attitudes and Statistical Evidence, London, NIESR.Google Scholar
Smith, J.W., Alexander, J. and Phillips, D. (2011), Providing and Funding Strategic Roads, London, RAC Foundation.Google Scholar
Tassey, G. (2014), ‘Competing in advanced manufacturing: the need for improved growth models and policies’, Journal of Economic Perspectives, 28, pp. 2748.CrossRefGoogle Scholar
The Conference Board (2014), Total Economy Database, http://www.conference-board.org/data/economy/database/.Google Scholar
Teulings, C. and Baldwin, R. (eds) (2014), Secular Stagnation: Facts, Causes and Cures, London, CEPR Press.Google Scholar
Timmer, M., Inklaar, R., O'Mahony, M. and van Ark, B. (2010), Economic Growth in Europe: a Comparative Economic Industry Perspective, Cambridge, Cambridge University Press.CrossRefGoogle Scholar
Van Reenen, J. (2013), ‘Productivity under the 1997–2010 Labour government’, Oxford Review of Economic Policy, 29, pp. 113–41.CrossRefGoogle Scholar
Warwick, K. (2013), ‘Beyond industrial policy’, OECD STI Policy Paper No. 2.Google Scholar
Woessmann, L., Lüdemann, E, Schütz, G. and West, M.R. (2007), ‘School accountability, autonomy, choice and the level of student achievement: international evidence from PISA 2003’, OECD Education Working Paper No. 13.Google Scholar