The UK State

Philip Arestis and Nikolaos Karagiannis
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Philip Arestis: University of Cambridge
Nikolaos Karagiannis: Winston-Salem State University

Chapter Chapter 2 in Proper Economic Policies Under the Post-Pandemic Era, 2025, pp 17-77 from Springer

Abstract: Abstract UK GDP growth in the decade leading to Global Financial Crisis (GFC) of 2007–2009 was 2.7%; since then, it has been closer to 1.7%. Productivity is at a 15-year low rate. Productivity in the UK stopped growing in 2009, according to ONS; it is 24% lower in May 2024 than previously in 2009. Increase in workers’ productivity would help investment to increase. There are more than 10mn workers who do not have the necessary skills to work effectively, which contributes heavily to stagnate productivity. The current account has grown to 8.3% of the GDP. Labour shortages, due to older workers’ disappearance and the relevant damage due to Brexit (see new research estimates by the Changing Europe and the Centre of the European Reform, reported in the Financial Times, 17 January 2023), show that the UK faces a shortfall of 330,000 workers, which has ended the free movement of labour with the EU (The Economist, 9 July 2022). There is also some evidence that migration in the UK led to lower wages, in relation to migrants arriving from the EU (Nickell and Salaheen 2006; also, Whyman and Petrescu 2017). Keiller (2024) investigates the causal relationship between the UK and the EU after the UK voted on 23 June 2016, to leave the EU. The paper shows that the UK firms’ exposure to EU trade had a negative impact on investment after the referendum, especially in 2021. Also, some evidence is provided of depressed investment from UK exposure to non-EU imports, due to the depreciation of the sterling, following the Brexit vote. Had the UK voted to remain in the EU, the relevant estimates based on ONS data show that investment would have been over 7% higher between 2016 and 2021. The results indicate that Brexit affected imports more adversely than exports. Research at Aston University, published on the 17th of September 2024, showed that annual exports to the EU were 17% lower and imports 23%, lower than what they would have been without Brexit emergence. Clearly, Brexit causes problems to the UK economy, implying that the UK government needs to reset strategy to prevent these serious problems. It should be noted that the Governor of the BoE proposed to the UK ministers to rebuild relations with the EU, in view of Brexit caused serious problems for the UK. That proposal was made at the Mansion House dinner in London on the 14th of November 2024.

Date: 2025
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DOI: 10.1007/978-3-031-88520-4_2

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