Sajid Javid’s growth plan unlikely to succeed, says think tank
Sajid Javid’s plan to double the UK’s economic growth rate has little chance of success, according to a major think tank, as Britain pays the price for weak productivity.
Javid has said he wants to boost UK economic growth to around 2.75 per cent by “levelling up” spending across the country.
Yet the National Institute of Economic and Social Research (Niesr), Britain’s oldest economic think tank, said today there is only a one in five chance of such an acceleration coming off.
Garry Young, director of macroeconomic modelling and forecasting at Niesr, said such a boost would “require significant improvements in productivity throughout the economy, especially where productivity has hitherto been lagging”.
Productivity is the key to economic growth, but it has all but stagnated in the UK over the last 10 years. Output per hour worked is around 20 per cent below where it would be if it had continued at pre-2008 trends.
The chancellor has pledged to increase productivity through investment, particularly on infrastructure in areas such as the north and midlands that have struggled with boosting output.
Sajid Javid will lay out his spending plans in a Budget on 11 March that will set the tone for the new administration following a landslide election victory in December.
Niesr said that to achieve growth rates of 2.75 per cent per year would require productivity to grow by 2.5 per cent on average. The Bank of England thinks it will grow at roughly 0.5 per cent on average over the next four years.
The think tank said Javid’s plans to raise annual public investment by £20bn would likely boost the level of economic output and productivity by just 0.4 per cent.
The Bank of England predicted last week that the UK economy grew by 1.3 per cent in 2019, its slowest since the financial crisis.
Niesr said today that it expects growth to remain at 1.3 per cent for 2020 but then pick up slightly to 1.6 per cent in 2021.