Business

UK v rest of G7: How's our driving?

Finance ministers from the seven most economically advanced developed countries are gathering in London. Their agenda will be wide-ranging, discussing tax evasion, finance and banking reform - and how to restore growth in a global economy which is still sluggish.

The government has cited poor economic performance in other developed countries as one of the reasons for the UK's own weak recovery since 2007.

The question is, just how well has the UK done by comparison with these countries?

UK growth v G7

In truth, the UK's economic recovery has been weak when compared with the other G7 nations. The UK economy is still more than 2% smaller than it was at the start of the crisis in 2007. Italy is the only other country that has performed worse. Germany, by contrast, has grown by nearly 4% and Canada by nearly 6%.

The UK has also "double-dipped" in a way that other countries have not (although Italy has remained in a long sustained recession).

Likewise, performance in the rest of the developed world outstrips the UK. On the basis of economic growth in 2012, according to the IMF, the UK ranks 19th of 31, performing better than only France and Italy in the G7.

There is some consensus and some fierce disagreement as to why the UK has fared worse than our fellow G7 countries.

Most would agree that the UK reliance on financial services left the economy highly exposed to the crisis. Countries in the G7 that have fared better (like Canada and Germany) have tended to rely more on other sectors, such as natural resources or manufacturing.

The government has also suggested that slowdown in the eurozone and the sovereign debt crisis has also had an impact on the UK. While this is undoubtedly true (and indeed, the eurozone itself is now in recession) many of the key countries (such as France and Germany) were not in recession when Britain was for the second time (in 2011-12).

There is also much debate as to the impact of the government's austerity policies and their effect on confidence, while others point to the UK's level of indebtedness as suppressing growth.

Net debt

All of the G7 nations are highly indebted. As far as the UK is concerned, however, the country is middle-ranking, with a net debt of just over 90% of GDP, greater than France, Canada and Germany, but considerably below the US, Italy and Japan.

Unemployment rate

On unemployment, too, the picture is mixed. The UK experienced some of the sharpest increases in unemployment from 2007. Increases (unlike Canada and France) seem largely to have levelled off, but the overall rate remains far higher than Canada, Japan or Germany and about the same as the US, which has experienced a reasonable decrease since 2010.

Inflation

On inflation, at least, the UK comes out "on top". The UK's inflation rate has largely always outstripped those of the other G7 states, only latterly overtaken by Italy.

This relatively high inflation rate is contributing to the cost of living, squeezing already depreciating household incomes.

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