Has Britain’s economy transformed during Queen’s 70-year reign?

03 Jun, 2022 - 00:06 0 Views

eBusiness Weekly

The UK economy of 2022 is barely recognizable from the one that greeted Queen Elizabeth II 70 years ago.

Butter, bacon and meat were rationed in 1952 as World War II cast a long shadow over an economy that was just a fifth of current size. Money was counted in shillings, men wore ties even on days off and pub goers could enjoy pints of beer for just 6p.

Today, suits and cash are both a far less familiar sight in the British pub, while wine and gin have both become much more popular tipples. Houses that once could be bought on one income now require two.

But some problems of that era remain familiar. Inflation was at 11.2 percent when Elizabeth became Queen — within a whisker of the level economists expect to see later this year.

Following are charts that describe the massive shifts the economy has seen since the coronation in 1952.

The UK as a whole is richer and healthier. The cohort born in 1952 had incomes higher than the average of their fellow citizens throughout their lives, according to the Institute for Fiscal Studies. At age 70, men and women can both expect to live seven years longer than they did seven decades ago.

The economy meanwhile has had a number of booms and busts. Oil shocks, currency crises, financial crashes along with Britain’s exit from the European Union and the pandemic have bookended periods of rapid growth. The overwhelming trend has been one of expansion.

Much of that increase has been fueled by a boom in services, which have flourished as the manufacturing sector receded. While the “big bang” deregulation of banking made Britain a global financial center, the portion of jobs done in factories has plunged to just 7 percent, from almost 30 percent in 1952.

Nowhere has Britain’s transformation been more apparent than in the housing market. The average house price has jumped from less than £2,000 — the equivalent of around £60,000 today — to a record £270,000, according to Nationwide Building Society.

It means housing has vastly outpaced inflation and earnings growth, and in some years generated more wealth for homeowners than they gained from employment. Those increases have strained the finances of people buying property. Many families require two incomes now to get on the housing ladder, whereas in 1952 it was mainly the salary of men that provided.

Homeownership surged in the second half of the last century. The shift accelerated under Margaret Thatcher, who promoted her vision of a “property-owning democracy” by encouraging council tenants to purchase their homes in the 1980s.

However, the trend has gone into reverse in the past 20 years because of the sharp increase in house prices.

The boom in house prices over the past decade was supercharged by record-low interest rates. Since it was founded in 1694, the Bank of England’s benchmark lending rate never strayed below 2 percent until 2009.

Then the financial crisis hit, followed by a period of sluggish growth and the coronavirus pandemic. The BOE responded by pushing rates close to zero and buying bonds to depress market rates. Now that inflation has reached a 40-year high, that era is screaming to a halt.

Across the 70 years, inflation has averaged just shy of 5 percent, leaving prices almost 24 times higher in total across the period.

The UK is no longer the trading force it was. In 1960, it accounted for almost 9 percent of world merchandise exports. Now its share is little more than 2 percent.

The decline came as manufacturing shifted to lower-cost economies such as China. A further period of weakness followed Brexit, with exports recovering from the pandemic less strongly than in neighbouring countries. — Bloomberg.

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