Exploring the UK Economy: Analyzing 5 Charts on the Key Election Issue

When UK voters head to the polls on July 4, the state of the world's sixth-largest economy will play a crucial role in shaping the election results.

Since 2010, the Conservative Party led by Prime Minister Rishi Sunak has been governing the country, navigating through challenging times such as the COVID-19 pandemic and the conflict in Ukraine.

The United Kingdom has faced challenges due to two self-inflicted wounds - severe austerity following the global financial crisis and the decision to leave the European Union in 2016, creating new trade barriers. This has led to sluggish economic growth, impacting living standards and depriving public services of necessary funds.

Sunak and Keir Starmer, the leader of the opposition Labour Party, are set to engage in their first televised debate on Tuesday night. The stakes are high, as polls indicate that the Conservatives may be voted out of office, with Labour potentially winning a UK election for the first time since Tony Blair's victory in 2005.

Sunak may highlight the decreasing inflation and the improving economy as evidence that his efforts to "restore economic stability" are effective.

However, numerous households continue to face challenges with the cost of living and are finding it difficult to cover their expenses. Additionally, according to polling conducted by YouGov, the state of the overstretched National Health Service is a major concern for voters, coming in second only to economic issues.

When voters head to the polls, they will be thinking about how their lives have changed since 2010, when the Conservatives took office. Let's take a look at the data on wages, living standards, the pound's value, house prices, and NHS waiting times.

Britain's Prime Minister Rishi Sunak (L) and leader of the opposition Labour Party Keir Starmer.

Britain's Prime Minister Rishi Sunak (L) and leader of the opposition Labour Party Keir Starmer.

Jeff J Mitchell/Alastair Grant-WPA/Pool/Getty Images

Incomes have hardly increased

Inflation reached an all-time high of 11.1% a year and a half ago, reducing the purchasing power of households. While the rate of price increases has decreased, and wages have been rising faster than inflation for nine consecutive months, the actual pay adjusted for inflation has barely gone up since 2010. This means that people are not significantly better off.

"Over the past 15 years, the UK has experienced a disappointing lack of income growth. This slow growth has affected everyone, regardless of their wealth or age," stated Tom Waters, an associate director at the Institute for Fiscal Studies (IFS), an economics research institute.

Waters also emphasized the importance of improving productivity in the long term.

The Resolution Foundation agrees with this assessment. According to the think tank, real average weekly earnings were £205 ($262) lower last year compared to what they would have been if they had continued growing at pre-2008 financial crisis levels.

In a report released in December, the Foundation highlighted that weak productivity growth has led to a significant slowdown in real wages. This trend was observed even before the recent surge in inflation, which is currently at its highest level in four decades.

Living standards have fallen short

Many advanced economies have been held back by weak productivity growth, which is typically measured as gross domestic product per hour worked, since the global financial crisis.

The United Kingdom has experienced a greater negative impact on incomes and living standards compared to its counterparts.

According to Nick Ridpath, a research economist at the IFS, the period from 2010 to 2024 has been economically significant due to sluggish earnings growth, substantial cuts in public spending, and notably poor productivity growth, all of which have contributed to a decline in living standards.

In the 12 years leading up to 2007, the average income of working-age individuals in Britain saw a significant increase of over 40%. This growth was more than three times higher than in the United States and a staggering seven times higher than in Germany.

However, between 2007 and 2019, the typical income in the UK only went up by 6%. This rate of increase was only half of what was seen in the United States and nearly three times lower than the growth in Germany.

The pound has decreased in value by 14%. The UK currency has faced challenges over the last 14 years, including the impact of the Brexit referendum in June 2016 and the negative effects of the "mini" budget introduced by former Conservative Prime Minister Liz Truss in September 2022.

Britain's decision to leave the European Union has been impacting the pound and inward investment for nearly ten years. A weaker currency can lead to higher inflation by increasing the cost of imported goods, which has been particularly challenging for Britain compared to the United States and the eurozone.

Clare Lombardelli, the incoming deputy governor for monetary policy at the Bank of England, highlighted the negative consequences of Brexit in a recent questionnaire on the central bank's website. She mentioned that Brexit has caused increased uncertainty, leading to reduced investment, output, and productivity. Additionally, Brexit has also had a detrimental impact on trade, further affecting productivity.

Home ownership is in decline

While real wages have hardly grown, house prices have soared, pushing the dream of home ownership out of reach for many Brits.

The average house price dropped from £291,716 ($373,236) in September 2022 to £284,691 ($364,242) in December of the same year, as reported by the Office for National Statistics (ONS). Despite this decrease, prices are still relatively high when compared to historical levels, especially in relation to incomes.

Due to the increased cost of housing, the rates of home ownership have declined. Census data from 2021 revealed that 62% of households in England owned their homes, a decrease from 68% in 2008/2009, according to official figures from before the Conservatives took office.

Many people in the UK are currently living in rental homes, which have become pricier. According to Zoopla, a property company, households now typically use over 29% of their income after taxes to pay for rent. This is an increase from 24% back in 2010.

The NHS is facing challenges due to being stretched thin.

One of Sunak’s promises to voters when he first became Prime Minister was to reduce NHS waiting lists. However, the number of patients waiting for non-emergency treatment in England has actually increased from 6.1 million in January 2023, when he made that promise, to around 6.3 million in March of this year.

These treatments include diagnostic tests, scans, hip and knee replacements, non-urgent cardiac surgery, cancer treatment, and neurosurgery. Because some patients need multiple treatments, the total number of outstanding appointments reached 7.5 million in March, as reported by NHS England.

Since the beginning of the Covid-19 pandemic, NHS waiting lists have been increasing steadily. This has led to worker shortages in the UK. According to the ONS, over 2.8 million people were considered "economically inactive" between January and March 2024 due to ill health. A survey conducted by the ONS in February 2023 revealed that one-third of the economically inactive individuals were waiting for NHS treatment.

Editor's P/S:

The article provides a comprehensive overview of the economic challenges facing the UK as voters prepare to head to the polls. It highlights the impact of austerity measures, Brexit, and the COVID-19 pandemic on wages, living standards, the value of the pound, house prices, and the NHS. The data presented paints a bleak picture of sluggish economic growth, stagnant incomes, and rising costs of living.

The upcoming election will be a crucial test for the Conservative government, which has been in power since 2010. The Labour Party, led by Keir Starmer, is hoping to capitalize on the public's dissatisfaction with the current economic situation and regain power for the first time since 2005. The outcome of the election will have a significant impact on the UK's economic future and the lives of its citizens.