Report

French lessons for Britain’s economy

This report from UK think tank the Centre for European Reform finds that macro-economic forces have been crucial to the bigger productivity slowdown in Britain.

Average wages in Britain are only slightly higher than they were in 2007. That extraordinary fact is down to extremely weak productivity growth after 2008. France, on the other hand, managed to keep pace with US output per hour in the decade after the financial crisis. French incomes are similar to British – and lower than American – largely because French people tend to ‘bank’ higher productivity by working fewer hours, rather than earning more.

A new CER policy brief, ‘French lessons for Britain’s economy’, finds that contrary to the popular view – that the biggest constraint on UK growth is its planning system – macro-economic forces have been crucial to the bigger productivity slowdown in Britain. The investment bust after the financial crisis was bigger in Britain than in France, and the UK’s recovery was weaker than in the US. That was true of investment in property, in other physical assets like machinery and computers, and in ‘intangibles’ such as R&D and branding. The Brexit vote in 2016 then snuffed out the investment recovery in all three asset classes. The 2008 crisis damaged productivity in finance and manufacturing more in the UK than France, and Brexit has curtailed output and exports in those sectors since.