UK inflation: how does Britain compare to other economies? – BBC news

  • Author, Ben Chu
  • Role, BBC Verify

On the day Rishi Sunak called an election for July and the latest figures showed inflation was falling, the government spoke about its record on the economy.

Chancellor Jeremy Hunt made a number of claims on BBC Radio 4 on Wednesday, including comparisons between the British economy and other countries.

We have looked at a number of them.

Inflation

Mr Hunt said: “Inflation [in the UK] is now lower than in the eurozone or in the United States of America, but prices are still a lot higher than a year ago.”

But UK inflation peaked higher than the US and eurozone, at 11.1% in October 2022.

Grow

Mr Hunt said that “the British economy will grow faster than that of France, Germany, Italy or Japan over the next six years,” according to the International Monetary Fund (IMF).

It must be said that it is very uncertain to predict what the economy will look like in six years.

Indeed, the IMF predicted that the UK economy, as measured by gross domestic product (GDP), would be 8.8% larger at the end of 2029 than at the start of this year.

That would be more growth than forecast for France (8.3%), Germany (5.7%), Italy (3.5%) or Japan (4.4%).

But it would be smaller than the other two members of the G7 major advanced economies: the US (13.7%) and Canada (10.8%).

It should also be mentioned that other forecasters are less optimistic about Britain, at least in the short term.

For example, the Organization for Economic Co-operation and Development (OECD) predicts that Britain will have the worst growth in the G7 next year. The OECD is a group of countries whose aim is to support economic development, raise living standards and promote the growth of world trade.

Standard of living

On what has happened to living standards in Britain, Mr Hunt said: “Living standards have fallen even further in Germany, Austria and Sweden.”

The chancellor did not specify what standard of living he was talking about, or what period.

BBC Verify couldn’t find the figures to back up its claim, so we asked the Treasury.

It told us that Mr Hunt was referring to the OECD measure of ‘gross disposable household income’ over a specific period – comparing July to September 2022 with October to December 2023.

This is confirmed by the OECD data, although the choice of time period appears arbitrary, as does the selection of comparison countries.

If you look at UK living standards between the last three months of 2019 – before the pandemic started – and the end of last year, they performed worse than those countries and also worse than the G7 average.

The G7 (Group of Seven) is a group of seven major industrialized economies.

Investment

“We attracted more than that [foreign direct investment] thereafter anywhere in the world except the United States and China since 2010,” Hunt said.

The Department for Business and Trade produces a review of “greenfield data on foreign direct investment”.

‘Greenfield’ refers to the entire new investment in a country.

This data shows that foreign investment in Britain grew by £498 billion between 2010 and 2022. That is lower than the US (£848 billion) and China (£708 billion), but higher than Germany (£222 billion) and France (£133 billion).

Another indicator of the relative attractiveness of European countries to foreign investors, compiled by accounting firm EY, suggests that Britain has fallen behind France.

World Bank data on foreign direct investment as a share of the economy shows that the difference between France, Germany and Britain is less pronounced than the greenfield data.

Additional reporting by Gerry Georgieva

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