Why the UK's Economy is Awful

I did watch the video late last night and have given it some thought. I found the statistics interesting and agree wholeheartedly about the damage Thatcher’s policies did in both the short and long term, notably priotising the financial markets over manufacturing and the sell off of council houses.

We can see some of what she did echoed in Farage’s recent pronouncment that Jaguar Land Rover (under cyber attack) deserves to go out of business. He completely ignores the fact that not only tens of thousands of JLR workers in the Midlands would lose their jobs but tens of thousands of people in the supply chain would too. Nothing changes in the mindset of the right.

What I did find skewed in the video were the visuals. It cut pictures of the wealthier parts of London with pictures of Jaywick and other very poor places in the UK. There are very poor parts of London too and very wealthy parts of the UK outside of London. The gap between rich and poor continues to grow but other factors are at play not least inherited wealth and that isn’t confined to London.

But isn’t it ironic that somewhere like Jaywick, part of Clacton, should elect someone to represent them who was part of this City money-making elite, someone who still prioritises personal gain over working for his constituents. Then there’s Tice who made his money from property speculation. Rupert Lowe (now Independent) another banker. James McMurdock, (now Independent) junior admin in banking. The only Reform MP elected in 2024 who wasn’t involved in making money in London is Lee Anderson but even he now pursues personal enrichment like the others have, through TV appearances, social media ciicks and the acquisition of dubious sponsors, One is property multi-millionaire Andrew Perloff - he of the tasetless roadside tableau depicting female Labour cabinet members as cows for slaughter.

These MP's lives are a world away from the poor people they are meant to represent. Why do people vote for them? Are they really so brainwashed into thinking that their poverty is the fault of desperate migrants when bankers and property speculators are the real villains?

The proliferation of foreign money buying up London property is a very real problem. When Grenfell Tower burned, Kensington Council were desperately trying to find accommodation for the survivors. Meantime one in eight properties in the borough sat empty, bought and owned by the wealthy as investments.

At around 8,600 people, the City of London has a relatively small residential population compared to London as a whole but according to Action on Empty Homes, one in four residential properties in the City is not in use:

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I wonder how many those are in the 2000 unit Barbican. Built as council flats for rent, sold off from 1980 under Right to Buy and now changing hands for £800,000 for a one bedroom flat and £2,000,000 for a three bedroom flat. Immoral.

A great deal of the decline in industry came about due to Industrial action: the dockers in the '50s in Southampton, the Midland's car industry in the 70s, the Miners in the eighties.Now we have train drivers, who haven't considered the possibility of automatic trains and tubes. Not to mention the binmen.

Numbers homeless, the numbers didn’t ring true

London does claim to have around 200 thousand homeless or in temporary housing 2% of the population of 10m

New York has far more, 350 thousand homeless and temporary housing nearly 4% of the population

Paris seems better at 1% of population but that seems to be actually on the streets not those in temporary shelter

It’s a disgrace what ever the true numbers are, London has plenty of money but nobody cares

You're welcome sunami.

Thank you for all that transcription DAR.

MaizieD

I feel Dd’s frustration.

There is nothing new about the content of the video. People have been pointing out this for at least the last decade or more. It has been brought up on Gnet a number of times and produces very little interest, or descends into a discussion of posters’ personal circumstances, mostly to oppose the idea that there is anything wrong with the current economic system (which has been dominant for the past 40+ years).

I’ll be interested to see if this thread is any more productive…

or descends into a discussion of posters’ personal circumstances, mostly to oppose the idea that there is anything wrong with the current economic system (which has been dominant for the past 40+ years).

You're right.

I spent my childhood in London up to age 18. In those days I have to admit we kind of thought London was the centre of the universe and the north was dirty and poorly resourced ( all the black sooty buildings emphasised this) . My Mum was from Yorkshire and always said Londoners were unfriendly. Probably the lack of eye contact and conversation in public places. Not so much has changed perhaps ?

A "like" box would help, wouldn't it.

The trouble with GN is you can't tell how many are just reading and can feel that you are talking to an empty space!

Tizliz

Some of us read but don't feel qualified to comment

Which is fine.

Some of us read but don't feel qualified to comment

Globalisation for the few not the many!

Decline

The United Kingdom is a shell of its former self. What once was a prosperous country has become a mostly vestigial nation with a single thriving city.

Tony Blair once promised that the kaleidoscope has been shaken. The pieces are in flux. Soon they will settle again. Before they do, let us reorder this world around us. But two decades later, the only thing reordered has been the United Kingdom around London. The tragedy is that Britain still has the ingredients for prosperity.

But until they can spread opportunity beyond London, that promise will remain broken. So, yes, Britain still has money, they still have power and they still have prestige. But it is concentrated in a few square miles along the Thames.

For everyone else, the empire is gone. The factories are gone and the future is shrinking. London sits and eats Michelin star food, while the rest of the UK eats scraps in the alleyways like stray cats.

Doodledog

I can’t quote you petra, but no, of course I don’t think that people have nothing better to do. I was simply pointing out that video is not the best way of getting information to everyone.

Speaking only for myself m, I can easily read from links, but can only watch video when I am on my own, and don’t always remember to do so. Others’ mileage will, of course, vary.

I often watch utube with someone else in room. I have earphones to plug into laptop or phone,
Very cheap to buy from ebay.

Neglect

But housing is only one piece of the puzzle. The deeper issue is where Britain puts its money, and for decades the answer was simple. London. When most people visit London, they complain about the tube and the poor infrastructure. Clearly these people haven't been to other parts of the country.

If you look at transport investment in the UK, London takes the cake. The city gets nearly £1,200 per person. Compare that to the northeast at just £430, and the East Midlands at £350. Even the southeast, the closest region, barely gets half of what London gets. To put it in perspective. If the North had been funded at the same per person rate as London, it would have seen an extra £140 billion of investment. That's the equivalent of building seven Elizabeth lines.To make matters worse, Britain underspends on transport compared to its peers. OECD data shows that the UK put just 0.3% of GDP a year into roads between 1995 and 2020.

Compare this to Italy at 0.4%, Germany and the US at 0.5%, in France at over 0.6%. The tragedy is that this underinvestment makes Britain's cities less productive. With weak road and rail links, cities outside London have far less effective size, fewer people can commute, and fewer jobs are connected, less growth is possible. A unique data point that encapsulates the problem is that UK is pretty much the only place in Western Europe where city size does not correlate strongly to economic productivity.

The poor infrastructure is a critical driver of this. And it's not just transport. The same neglect shows up in R&D. R&D expenditure is heavily incentrated in higher productivity, higher income locations. Ergo, London. In 2016, the government spent just £21 per person on R&D in the North of England and £14 in the Midlands. In London it was £60. This creates a reinforcing loop. More R&D means London firms grow faster, which attracts more private capital, which funds even more R&D.

Moreover, Britain is the outlier. Germany's poorer regions, the smaller bubbles on this graph receive more public R&D support. In the UK, it's the opposite. The outcome is obvious. The places that need support the most are left with scraps, and Britain's R&D policy ends up deepening inequality instead of fixing it. Now there is merit to prioritizing government R&D investment into areas where there is business R&D investment. But that isn't even what the UK is doing. In fact, areas like London receive more government R&D support relative to the amount of business R&D in the region, whilst the rest of the UK receives less. Put simply, businesses outside of London are being deprioritized in favor of those in London. Just another reason the UK revolves around London and the quality of life is deteriorating.

TerriBull

I do loosely agree about London being an enclave of privilege but not to the extent all Londoners benefit from that. I also agree with Grantanow re. Chinese and Indian manufacturers, who aren't always egalitarian as to how they treat their workers and the lack of investment by successive governments in home grown industry. Meanwhile RR is doing her best to strengthen ties towards Chinese based companies who have no autonomy from the Chinese state and who have found crrative ways of avoiding tax as always.

London has more inequality than just about anywhere else. I think that point was made in the video. London has some of the poorest local areas in the country, despite controlling trillions of pounds. The fact is that on average people living in London and parts of the south east are wealthier than the majority of other areas on average.

The kind of enterprises which make up the economy, transport links and available quality of housing affect the prosperity of local regions. We're beginning to see regeneration of the centres of some of the former great industrial cities, including Manchester, Leeds, Newcastle, but they are still surrounded by smaller towns which don't benefit from good transport or the employment opportunities of city centres.

There is a north/south divide, but there are also more localised divides resulting mainly from the transition from a manufacturing to a service economy.

Housing

As cities become poorer, people begin to move to wealthier ones in search of greener pastures. It's only natural. In fact, this phenomenon is studied the world over. As such, as London began to grow. Many economists believe that there would be a significant migration to the big city from other parts of the United Kingdom. But they were wrong.

Even though people in the UK moved between regions at a higher rate than other G7 countries. London is the exception. In fact, Britons move away from London more than they move to London. London is one of the only cities in the UK with a negative internal mobility rate. But how does that make any sense? Especially when you take into account that median household incomes in London are 14% higher than the UK. Isn't it obvious to move? Well, not if you take into account living costs. When you factor in housing, household incomes are only 1% higher in London. So unless you are in the top quartile of earners, it absolutely makes no sense to move. Housing in London is nearly two times greater than the UK average. And when you take into consideration what you get for your dollar, it's even more expensive.

It's no surprise, then, that London has a major homelessness problem, but it's not like anything seen in the Western world. Homelessness advocates counted over 13,000 rough sleepers in London in 2024, for a 10% increase from the year prior. And a 63% increase from a decade ago.

Overall, 2% of Londoners are considered homeless. Compare that to New York at 0.8% percent, Toronto at 0.5%, Paris at 0.3%, Berlin at 0.3%, and Amsterdam at 0.2%. London is in a league of its own. One of the reasons for housing struggles is the Right to Buy scheme that Margaret Thatcher introduced in 1980. The idea was to privatize social housing by allowing tenants who lived in these homes to purchase them at a discount from the governmen. And these discounts were steep. Initially, 33% for houses and 50% for flats, which was later raised to 70%. Now, many conservative minded folks might say this sounds like a good idea, but I assure you it is absolutely not. The government was basically allowing people to buy properties at steep discounts to market value, without any promise of ensuring that housing stock would remain affordable.

This policy would economically benefit the current generation at the expense of future generations. And not only that, local authorities had to offer mortgages with no deposit. So do the math. If you bought a property for 0% down at a 70% discount, then sold it for market value a few years later, untaxed, might I add, you would be laughing to the bank. The problem was particularly acute in London.

In 1980, London had around 715,000 of these homes, representing nearly 30% of the entire housing stock in the city. But today, only 390,000 of these homes remain. And social housing now comprises around 10% of housing stock, a decrease of 61%. Furthermore, across the UK, it is estimated that at least 40% of Right to Buy homes are now rented at market rates.

But there are more reasons than just this for London's skyrocketing housing prices. For one, there are no legal restrictions for foreign nationals to purchase propert in London. Meaning millionaires and billionaires from abroad have no barrier to buying in London. And they take advantage of this.

Roughly 27% of total residential property sales in London in Q1 of 2024 were to foreign buyers. Now you might be asking, what is it look like in other major cities like New York? While London is at 27%, New York is at 0.3%. That's a 90 times difference. And it gets worse. Over 20% of new rental properties in London have at least one foreign shareholder, doubling from 2016.

One of the reasons for this is the UK's non-dom tax status, which has basically been abolished. This enabled UK residents who claim their permanent home was abroad, to avoid paying UK tax on foreign income and capital gains. Now, some might think this is a smart policy, but it is deeply shortsighted.

Yes, these people bring money from abroad and spend it locally, but they also compete with the local population on scarce resources like housing. Now, if you have a handful of these people, it's really not an issue. But if you have 83,000 of them, you have a major problem.

Countries around the world love the idea of rich people spending their money in their country, but it always leads to housing dislocations. Sydney. Melbourne, Vancouver and others all fell trap to this. Moreover, these rich individuals don't contribute in the same way to the economy. They aren't going to take care of the sick and old. They aren't opening new businesses locally and employing people locally. They aren't working at all. They simply buy luxury homes and cars, eat out and sleep. Yes, they contribute a little to the economy, but they are nothing more than a way to pad stats. All of this at the expense of local people.

I do loosely agree about London being an enclave of privilege but not to the extent all Londoners benefit from that. I also agree with Grantanow re. Chinese and Indian manufacturers, who aren't always egalitarian as to how they treat their workers and the lack of investment by successive governments in home grown industry. Meanwhile RR is doing her best to strengthen ties towards Chinese based companies who have no autonomy from the Chinese state and who have found crrative ways of avoiding tax as always.

Grantanow

It's not clear to me that Mrs Thatcher ruined the UK's rust belt industries. Surely the decline was brought about by the rise of Chinese and Indian manufacturing which could make products more cheaply than the UK. That still seems to be the case. One underlying problem has been the reluctance of UK governments to invest in new industries, probably because most politicians and civil servants lack scientific understanding. Also the willingness of governments to prop up failing industries for Party political reasons.

IfI had a couple of hours... let's just say she had to do it in order to introduce her free-market economic plan... the consequences of which we are still feeling today.

However I came here to say that this buying up of London property has been going on for years, certainly since the Blair government.

I live in the north, and we are noticing slow but steady improvements here in lots of towns and cities. It isn't all doom and gloom...

If you really really want to know where the money goes ( and not told by Americans) watch The Spiders Web Britains second Empire on Netflix.
Be prepared to be very angry 🤬

I can’t quote you petra, but no, of course I don’t think that people have nothing better to do. I was simply pointing out that video is not the best way of getting information to everyone.

Speaking only for myself m, I can easily read from links, but can only watch video when I am on my own, and don’t always remember to do so. Others’ mileage will, of course, vary.

It's not clear to me that Mrs Thatcher ruined the UK's rust belt industries. Surely the decline was brought about by the rise of Chinese and Indian manufacturing which could make products more cheaply than the UK. That still seems to be the case. One underlying problem has been the reluctance of UK governments to invest in new industries, probably because most politicians and civil servants lack scientific understanding. Also the willingness of governments to prop up failing industries for Party political reasons.

sunami

escaped

It's frustrating when green or white trouser suits generate hundreds of comments.
I can do both discussions!

I thought you were busy getting ready to return to the UK. That video is only 17 minutes.

You make me laugh!

I agree this is nothing new Maizie, certainly not to you, me and others. But if one person grasps it for the first time, or it fills out their knowledge, then it's worth our time posting and discussing it.

London eats Michelin star meals, while Britain scrapes for leftovers.

Just a quick observation here; fine dining exists in London because excellent chefs, even from the French provinces, have been drawn to London for decades to practise their Art. I'm not saying it's right, just saying that the capital is a mecca for all sorts of industries which are sustained by the folks who live there and spend money. Catch 22.