Economy — United Kingdom · Synthesis

Weak but recovering growth. UK GDP grew by around 0.9% in 2024 (ONS), after nearly falling into recession at end-2023. The recovery is modest, comparable to France and the European average, but far from US dynamism. Consumption, long squeezed by inflation, is picking up as prices slow.

The productivity problem. The Achilles heel of the British economy is the stagnation of productivity since the 2008 crisis, more pronounced than in peer countries. This is the deep cause of weak real wage growth and living standards, documented by the IFS and the Resolution Foundation.

Public debt close to 100% of GDP. Public debt stands at around 100% of GDP (ONS/OBR), a level not seen since the 1960s, after the Covid and energy shocks. The deficit remains elevated (of the order of 4.5 to 5% of GDP) and fiscal headroom is thin, closely monitored by the OBR.

The Brexit footprint. The departure from the European Union (effective since 2020) has weighed on trade, investment and labour supply in certain sectors, according to the OBR and numerous studies. The exact scale of the effect remains debated, but a negative impact on trade and productivity commands a broad institutional consensus.

The City and services. The United Kingdom retains a very powerful services sector, in particular finance (the City of London), and a services surplus that partially offsets a goods trade deficit. The economy is one of the most services-oriented among the major countries.

Raising productivity and investment. The principal long-term challenge is to exit productivity stagnation through investment (public and private, historically low), skills and innovation. This is the key to sustainable income growth.

Constrained fiscal margins. With high debt and public services under pressure (NHS, justice, see the Health and Justice categories), fiscal trade-offs are tight. The OBR and IFS highlight the difficulty of reconciling investment, tax cuts and sustainability.

Relationship with the European Union. The evolution of the trading relationship with the Union (reducing frictions, sectoral agreements) is a potential lever for trade and investment, in a still politically sensitive debate.

Energy and the transition. Energy costs and the transition to low carbon (see the Environment category) are factors of competitiveness and investment, in a country that leads on offshore wind but remains dependent on gas.

The open questions. Three trade-offs will shape the period: (1) reviving productivity through investment; (2) stabilizing debt with thin margins; (3) smoothing trade post-Brexit.

Placed in its environment, the United Kingdom appears as an economy with average growth, held back by productivity and indebted, but endowed with a leading services sector.

Three takeaways. (1) Growth: in line with the average. At +0.9% in 2024, the United Kingdom matches France and the EU average, does better than Germany (−0.2%) and Italy (+0.7%), but remains far behind the United States (+2.8%).

(2) Debt: high. At ≈ 100% of GDP, British debt is higher than Germany's (≈ 63%), close to France (≈ 113%) and the average of the major countries, but lower than Italy (≈ 135%).

(3) Productivity: the decisive gap. The weakness of British productivity, more pronounced than in peer countries since 2008, is the root of income stagnation — a more structural than cyclical challenge.