Decline… and fall? The UK economy

Recorded at the Battle of Ideas festival 2025 on Sunday 19 October at Church House, Westminster. ORIGINAL INTRODUCTION After a year of a Labour government, the UK is heading for a ‘debt-crisis cliff edge’, if it is not already in a ‘debt doom-loop’. Things are in many ways worse even than the moribund economy that the Conservatives bequeathed. Government borrowing, inflation and unemployment are going up. The interest rate that government is paying is also up, making the fiscal position even worse. Attempts to rein in welfare spending have been curtailed due to pressure from Labour MPs. Meanwhile, the broader economy continues to stutter. After a comparative boom in the first quarter, the economy was shrinking again by the summer. Job vacancies continue to fall, in part thanks to higher employment taxes, while the number of people on sickness benefits continues to rise. Energy costs remain high compared to competitors like the US and China. The ongoing uncertainty caused by Donald Trump’s trade tariffs and conflict in the Middle East hasn’t helped, but the UK economy was already weak. There has been renewed talk of ‘stagflation’ – a stagnant economy alongside rising inflation. But is this assessment a bit too gloomy? As one Telegraph commentator noted in July, private-sector debt has been falling faster than government debt has risen: ‘You would hardly know it from our compulsion to talk the country down, but the UK is today one of the least indebted states in the rich world.’ Inflation is still way down on levels seen during the post-pandemic energy-price crisis. The official unemployment rate (4.7% in May) was still well below the EU (5.9%), Germany (6.0%) and France (7.4%) and not very different from the US (4.1%). Is the UK economy in big trouble or have we all become too adept at talking the country down? Have we underestimated the ongoing impact of the 2008 financial crisis and the cost of dealing with Covid? Is there anything Labour can do to kick-start growth or are we at the mercy of events elsewhere? SPEAKERS Rob Lyons science and technology director, Academy of Ideas; convenor, AoI Economy Forum; author, Panic on a Plate Jon Moynihan businessman; former chair, Vote Leave; Conservative peer; author, Return to Growth: How to Fix the Economy Professor Vicky Pryce chief economic adviser and board member, Centre for Economics and Business Research; author, How to be a Successful Economist Karl Williams research director, Centre for Policy Studies CHAIR Timandra Harkness journalist, writer and broadcaster; author, Technology is Not the Problem and Big Data: does size matter?; presenter, Radio 4's FutureProofing and How to Disagree