After 1078 days in office, Britain’s love-hate relationship with Boris Johnson has come to an end. For some, persona will be missed. For others who believe his resignation could not come sooner, his flippancy to office and dubious party antics marred the duration of his premiership. While the defining moment of his tenure was undoubtedly guiding Britain through the pandemic, his role in finalising Brexit and lavish fiscal largesse made him a divisive character among the public. However, for someone with a large personality, he certainly left behind large problems for the next resident of 10 Downing St.
Two important economic challenges confront the UK now. Income distributions have worsened off the back of slower growth in median incomes/ Between 2004 and 2019, that figure rose by just 12%, indicative of stagnation across both top and bottom deciles. For income distribution, Britain ranked second behind the US for the distribution of disposable income. Compared to its European peers, household income was 9% and 16% below France and Germany respectively. Productivity has also stagnated, with the UK’s relative GDP per capita falling from 92% of German levels in 2007 to 82 in 2021. While improving employment has offset productivity plateaus, long-term growth will depend on the robustness of heavy reform. This has been a notable policy vacuum left behind by Johnson’s premiership, whose promise to reform Britain’s sclerotic institution, resuscitate its industrial, and tear through layers of inefficient red-tape ultimately fell through.
The solutions proposed are certainly palatable. As a leader in energy, exploiting Britain’s shift to accelerate growth while achieving environmental outcomes is a way forward. Improving corporate governance and capital markets to incentivise innovation and investment can further stimulate the economy past its present stagnation. For industries, it will be important to play catch-up for regions and firms left behind. A shock of fiscal injection may be necessary to bring them up to the economic frontier.
