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Osborne’s Britain lags behind France and Germany

The UK economy continues to struggle but its competitors are racing ahead.

France and Germany have just released their growth figures for the first quarter of 2011 and they show that Britain continues to lag behind its main competitors. The French economy grew by 1 per cent, its fastest rate of expansion for five years, and the German economy grew by 1.5 per cent, its highest level of growth since the financial crisis.

But while France and Germany outperformed expectations, the UK grew by just 0.5 per cent in Q1 (below the OBR forecast of 0.8 per cent), failing even to recover the lost output from the previous quarter. As Sunder Katwala pointed out, "a 0.5 per cent increase on the reduced figure doesn't make up for the 0.5 per cent fall from a higher base".

When the coalition entered office the economy was growing at an annual rate of more than 4 per cent (growth in the second quarter, thanks in part to Labour's fiscal stimulus, was 1.1 per cent), but for the past six months it has flatlined. And that's before the bulk of the spending cuts has been implemented.

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Earlier this month, Osborne's team made a risible attempt to claim that the UK economy had outperformed that of the US, which grew by 0.4 per cent in the first quarter. But as I explained at the time, this is an entirely bogus comparison. As the graph shows, while the British economy shrank by 0.5 per cent in the previous quarter, the US economy grew by 0.8 per cent. Thus, the US experienced real growth in Q1, while the UK didn't even recover the output that it lost in Q4.

The reality is that the British economy, which was at the top of the EU growth table in the first half of 2010, is now near the bottom. It isn't just the likes of the US, France and Germany that have raced ahead of the UK, Italy, Spain, the Netherlands and Belgium have overtaken us as well. Only Portugal and Greece have performed worse over the past six months.

A recovery that was already set to be weaker than those of the 1970s, 1980s and 1990s is now likely to be weaker still. There is every possibility that the Office for Budget Responsibility will be forced to downgrade its growth forecasts for the fourth time and that the coalition will miss its deficit targets. Osborne's plan isn't working.