UK economic recovery worse than Great Depression, and no sign of improving

It was announced this morning that the UK economy grew just +0.5% in 2011, a downward revision from +0.7% previously announced.  As the chart below from Citi illustrates, the UK economy has stalled.  UK real GDP is 4.1% below its pre recession peak, which makes this ‘recovery’ worse than the Great Depression.

The UK’s experience of the past few years is also considerably worse than Japan’s experience in the aftermath of its bubble.  Looking back, Japan’s decade doesn’t look all that ‘lost’ in comparison – Japan’s real GDP in 1991 was +2.6%, -0.1% in 1993, +0.9% in 1994 and +2.5% in 1995, and Japan’s average annual real growth rate through the 1990s was +1.2%. It’s also worth pointing out that for all the talk of austerity in the UK, the reality is that government expenditure actually increased by 0.1% in real terms last year.  Austerity hasn’t really started yet.

Sterling is the fourth worst performing currency in the world so far today, down 0.5% versus the euro and down 0.3% versus the US dollar.  A continuation of abysmal UK growth should result in sterling appearing more regularly towards the bottom end of the currency tables than the top.

UK economic slump worse than Great Depression

The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

Discuss Article

  1. FT Alphaville » Pasty-toting muppets says:

    […] Chart via Citigroup, bouncing off the latest UK GDP disgrace (hat-tip Bond Vigilantes): […]

    Posted on: 28/03/12 | 2:36 pm
  2. Justin Pugsley says:

    The UK downgrade is a bit of a surprise in one respect that GDP revisions usually take an upward trajectory, stuff gets left out in the initial release.
    But it shows the size of the task of bringing down the UK deficit relative to GDP (inflation doing much of the heavy lifting so far), rebalancing the economy away from debt fuelled domestic consumption and financial services that are supposed to be deleveraging. And all this against a backdrop of a fairly weak US recovery and a crisis in the Eurozone – when the UK is trying to become investment led and export orientated.
    But there are some bright spots: automotive and aerospace export are booming and all kinds of specialist engineering companies seem to be doing well – we just need an awful lot more of them.
    I think this malaise could drag on for another five years or so after which we might start to see some dynamism in the UK economy once again as some rebalancing would have happened by then. After all the UK has been through much worse in its history and still come through.

    Posted on: 28/03/12 | 2:44 pm
  3. FT Alphaville » No Resolution at all, really says:

    […] (H/T: Bond Vigilantes.) […]

    Posted on: 30/03/12 | 9:37 pm

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