UK economy to narrow GDP gap with Germany

LONDON: The United Kingdom will be Europe’s best-performing major economy in the next 15 years, narrowing the gap with Germany and extending its lead over France, according to new long-run forecasts.

The Centre for Economics and Business Research (CEBR) predicted that gross domestic product (GDP) growth in the United Kingdom will settle between 1.6% and 1.8% in the period up until 2038, helping it retain its position as the world’s sixth-largest economy.

The forecasts published on Tuesday predict that the United Kingdom will shake off an economic malaise lasting years that has been defined by Brexit and a string of shocks, including the pandemic and surging inflation.

The United Kingdom’s economy has been hampered by anaemic productivity growth since the financial crisis, with labour supply problems also emerging in recent years.

It has led the Bank of England to take a more pessimistic view of the UK’s growth prospects in the coming years.

Under CEBR’s long-run world economic rankings, the UK is expected to grow faster than all of the eurozone “big four” economies: France, Germany, Italy and Spain, but not as rapidly as the United States.

“The fundamentals of the UK economy are still very strong,” said Pushpin Singh, senior economist at CEBR. “London’s status as a financial and advisory services hub, along with the wider strength of the services sector across the United Kingdom, will push UK growth.”

He said the economic impacts of the United Kingdom leaving the European Union have “either been exaggerated or have not been explored enough yet”.

The economics consultancy expects China to overtake the United States as the world’s largest economy in 2037, with a doubling in world GDP being driven by developing economies catching up with their advanced peers.

By 2038, Italy will drop out of the world’s top 10 economies by size, replaced by South Korea.

The United States and Germany will slip down the rankings, while India and Brazil, two developing economies with large populations, will rise within the top 10.

France will under-perform the United Kingdom, particularly due to its large public sector and high tax levels, while Germany’s manufacturing slowdown will help narrow the gap, according to Singh. — Bloomberg