Economics and politics - comment and analysis
12. October 2016 I Heiner Flassbeck I General

The condition of the British economy before the Brexit. Part 2

In the first part of this series, I showed that the UK has been quite successful for what concerns the most important measures of economic development. Crucially, private consumption developed much better than in France, let alone Germany. But how did investment, productivity and foreign trade evolve? Since 1980, the development of gross fixed capital formation (i.e. equipment and buildings…


In the first part of this series, I showed that the UK has been quite successful for what concerns the most important measures of economic development. Crucially, private consumption developed much better than in France, let alone Germany. But how did investment, productivity and foreign trade evolve?

Since 1980, the development of gross fixed capital formation (i.e. equipment and buildings) in the UK remained entirely within the margins of Germany and France’s accomplishments (see figure 1). We notice that Germany experienced a huge unification boom (driven by – how could it be otherwise? – credit-financed government spending!), although it later on stagnated, until the outbreak of the financial crisis. The UK, on the other hand, recorded an investment boom during the 2000s, which then fell dramatically after the financial crisis.

Figure 1

uk21

However, as figure 2 shows, with 1999 as a basis year, since 2009, investment in the UK vigorously increased again. Compared to Germany and France, one can speak of a successful recovery of investment in the UK.

Figure 2

uk22
If we split investment into construction investment and equipment investment (see figures 3 and 4), it is clear that it is primarily the enormous building boom which makes Britain’s investment figures look impressive. Fro…
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