Britain’s productivity problem

Output and earnings growth have ground to a soggy halt. The British economy is stuck in the mud. Here’s why

Economics | Deleveraging and underinvestment

Forget the Falklands. British productivity is in the doldrums. For the last 15 years, the country's inflation-adjusted output per person has gone sideways when measured in US dollars. In fact, the country's gross domestic product (GDP) per person is still below its previous 2017 peak. On average, Brits produce $48,900 of stuff yearly, while in 2007 they produced $50,500 worth.

That trend is a concern. But more of a worry is how poorly the country has done compared to its peers in the G7, a group of big, rich countries. In 2007, real British GDP per person was $6,400 higher than the country's G7 peers. Now it's $10,700 lower. Britain's productivity problem comes from ongoing credit contraction since the global financial crisis (GFC), a lack of capital investment, and the gravitational pull of rising house prices.

Credit contraction is the first reason the British economy has struggled to become more productive. Since 2009, the private sector ha…