"This is what failure looks like" Scottish workers are £11,000 worse off after 15 years of stagnation

New research by the Resolution Foundation shows workers in the UK are £11,000 worse off a year after fifteen years of stagnation. It comes as the OBR warned that UK households face the biggest fall in living standards since records began, with real household disposable income (income adjusted for inflation) expected to fall by 6% between from this year to the next.

The Resolution Foundation research also shows typical UK household incomes are falling further behind neighbouring European countries - with household incomes in Germany now £4,000 better off than those in the UK, compared to £500 in 2008.

The OBR reported that Brexit is forecast to shrink UK GDP by 4%- with UK imports and exports 15 percent lower than if the UK had remained in the EU.

“This is what failure looks like"

Torsten Bell, chief executive of the Resolution Foundation, said that the wage stagnation of the past decade and a half is "almost completely unprecedented”, adding: “Nobody who's alive and working in the British economy today has ever seen anything like this. This is definitely not what normal looks like. This is what failure looks like".

An end to nearly 60 years of consistent growth

Xiaowei Xu, senior research economist at the Institute for Fiscal Studies, describes this as an "absolutely massive difference in living standards" that ends nearly 60 years of consistent growth.

Food prices surge at highest rate for 45 years

Meanwhile, food prices surged last month at their highest rate for 45 years.The salad crisis, which resulted in empty shelves once occupied by tomatoes, peppers and cucumbers, was highlighted by the ONS as the driving force behind the rise in fresh food costs. The cost of vegetables rose 18% in the year to February – the highest rate since February 2009.

That is also related to Brexit - partly because food producers in the UK have reduced production  due to the shortage of seasonal workers, as well as other global factors. The pound has lost 20% of its value since the Brexit vote which makes imports more expensive. The complexity of trade with the EU has also increased and is damaging trade relationships. 

The UK is falling behind other developed countries

Average UK real household income is broadly unchanged since 2007, just before the banking crisis, according to datafrom the Office for National Statistics. Yet household income per capita across OECD countries increased by 20 percent between the first quarter of 2007 and the third quarter of 2022, figures from the international organisation Vanguard Europe show. 

The UK has recorded the second-lowest GDP per capita growth among G7 countries after Italy since the financial crisis, OECD data show. British GDP per capita growth was half that of the US and the EU. 

UK wages adjusted for inflation, having increased by 23 per cent in the eight years to 2008, fell by 5 per cent in the following eight years, according to the ONS. By 2021, UK real wages were up just 4 percent from 2007, placing the country 28th out of 34 countries in an OECD ranking by earnings growth. That compares with a 20 percent increase in real wages in the US and a 16 percent rise in Germany. 

Less well-off households in the UK have suffered the most during the squeeze on living standards following the banking crisis and have recorded a decline in life expectancy, according to economists. Low income households in the UK are now 22 percent poorer than their counterparts in France, research by the Resolution Foundation found. 

Life expectancy across the UK “has slowed down, especially for people in lower income groups”, said Jonathan Portes, professor of economics and public policy at King’s College London. 

Economists told the Financial Times the reasons for the UK’s weak productivity growth — or slowdown in the pace of output per hour worked — include stagnant business investment since the Brexit referendum. 

Independent Scotland back in the EU can recover lost ground

Scotland is being forced to bear the consequences of decisions it doesn’t support. It is clear that Brexit is a big factor in the UK’s stagnation. All developed countries suffered from the financial crisis of 2007 and Covid. But other countries have started to return to economic growth while the UK lags behind.

Workers were told at the time of the Brexit vote that ending freedom of movement would boost wages. But damaging trade with the EU has reduced the size of the economic pie and that is one reason for wage stagnation. 

When Scotland becomes independent and rejoins the EU it will be in a strong position to grow trade, boost the economy, increase wages and recover that lost ground.