UK ‘no longer a rich country’ after 15 years of stagnation

Parts of Britain are now worse off than the poorest areas of Lithuania and Slovenia.

New research from the National Institute of Economic and Social Research (Niesr) found that parts of Britain are now worse off than the poorest parts of nations such as Lithuania and Slovenia.

Since the financial crisis of 2008, the UK's economic growth and productivity has lagged behind a number of other countries.

The institute said that the typical British worker would be £4,000 per year better off if the productivity growth and wages of the UK had matched those of the US.

 Max Mosley, economist at the Institute, said: “Economic stagnation over the past decade is now threatening the UK’s position as a place for a high standard of living.

"A combination of weak productivity growth driving near zero growth in real wages and cuts to welfare has resulted in a situation where we are neither delivering prosperity through high wages nor security through welfare.

“That the poorest in our country now fare worse than those in nations once considered less affluent is a stark indictment of the UK’s economic social model.”

Mosley said that the question of whether Britain is still a rich country is now "less straightforward" after centuries of being "easy to answer."

Niesr found that parts of Birmingham and the north east of England were worse off than the poorest regions of Slovenia and Lithuania. Nations that used to sit behind the Iron Curtain are experiencing strong growth and have become increasingly prosperous in recent decades.

Since 2019, the average real earnings of Brits has risen by less than 3 per cent, when accounting for inflation. Since the start of the financial crisis in 2007, they have risen by 6.6 per cent.

This is in stark contrast to the seven year period from 2000 to 2007, when real earnings rose by almost 20 per cent, Niesr found.

Adrian Pabst, the deputy director at Niesr, said there has been a "dramatic collapse in the living standards of the poorest 40pc in society."

He said: “The Government’s mission to grow the economy is not just about aggregate numbers but about higher living standards in every part of the country. It is vitally important to raise public investment in ways that unlock business investment to generate productivity increases and sustained real wage growth.”

Niesr has called on the government to raise the income tax threshold in an attempt to boost performance, and suggested ending the two-child limit on benefits as the most cost-effective way to reduce poverty.

"After more than 15 years of real wage stagnation for millions, working families need to see a tangible improvement in their living standards over the duration of this parliament,” Pabst said.

In a statement to ITV News, an HM Treasury spokesperson said: “This Government inherited the worst living standards growth since ONS records began but we are clear that getting more money in people’s pockets is the number one mission in our Plan for Change.

“Since the General Election, there have been three interest rate cuts, we have increased the National Living Wage by a record amount, real wages are rising at the highest level in six months, the Triple Lock on pensions means that millions will see their state pension rise by up to £1,900 this parliament and working people’s payslips have been protected from high taxes.”

Related: Michael Sheen uses own money to write off £1m of debt for people