It's that day in the month when we get GDP figures, and the farce of pretending that these are relevant continues.
As the Office for National Statistics says this morning:
Main points
- Monthly real gross domestic product (GDP) is estimated to have fallen by 0.1% in May 2025, following an unrevised fall of 0.3% in April 2025 and growth of 0.4% in March 2025 (revised up from 0.2% in our previous publication).
- Real GDP is estimated to have grown by 0.5% in the three months to May 2025, compared with the three months to February 2025, largely driven by growth in the services sector in this period.
- Monthly services output grew by 0.1% in May 2025, following a fall of 0.3% in April 2025 (revised up from a 0.4% fall in our previous publication), and grew by 0.4% in the three months to May 2025.
- Production output fell by 0.9% in May 2025, following an unrevised fall of 0.6% in April 2025, but grew by 0.2% in the three months to May 2025.
- Construction output fell by 0.6% in May 2025, following growth of 0.8% in April 2025 (revised down from 0.9% growth in our previous publication), but grew by 1.2% in the three months to May 2025.
Let me rewrite that for them:
- May 2025 GDP data continued to show the UK economy was stagnant.
- Taking population change into account, there was a likely decline in the standard of living for most people in the UK.
- This follows recent trends where this has also been the case.
- There are no signs that this situation is likely to change.
- The prospects for growth in the UK economy look to be remote in the extreme.
Let's put this another way: a year into her reign as a Chancellor who said her sole goal was growth it is very apparent that this is not happening, and is not going to happen any time soon.
The Office for Budget Responsibility think that is the case.
So, too, does the Bank of England.
And so does the Resolution Foundation.
Reeves hangs on to her dreams in glorious isolation and increasing desperation.
What do we do about it? First, abandon Reeves.
Second, recognise that GDP is a dire measure of wellbeing and move to something very much better.
Third, understand that however necessary money is, it cannot encapsulate all that is important about politics, let alone life itself.
We really have got things very wrong, and when we stop doing so, we might get better politics.
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If the percentage changes in GDP are routinely revised up or down by 0.1 or 0.2 percentage points, that suggests anything of that size is within the margin of error. By and large the economy is just bumping along without much change.
Given the horror with which the rather modest changes to NICs, or VAT on school fees, or non doms, or inheritance tax, were greeted, and the headwinds of geopolitics not least the unpredictability of the US, perhaps “no change” is a good result.
The changes to NI, etc meant GDP figures for this period were going to be noisy, so it’s great to read a wider trend from these figures.
However, solid growth it isn’t.
Innovate UK still has no replacement for Smart Grants. Anyone needing to learn to drive to get to work is all but blocked by a 6 month wait for a test. Waiting times for medical treatment are still near record levels, resulting in others staying signed off work more. The BoE continues to keep borrowing to invest growth-limitingly expensive. Attacks on welfare will hurt demand.
Given the goal, where is the growth playbook from the government?
Bobby Kennedy University of Kansas March 18, 1968
Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product – if we judge the United States of America by that – that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children.
Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.
If this is true here at home, so it is true elsewhere in world.
For a project I’ve been working on, I used ONS GDP and population data to calculate the average growth rate of UK real GDP per head each decade from the 1950s onwards. The results were striking:
1950s: 2.8% growth per year average
1960s: 2.8%
1970s: 2.5%
1980s: 2.4%
1990s: 1.9%
2000s: 1.1%
2010s: 1.3%
2000-2024: 0.2%
So in other words, since the 1960s the GDP growth rate per capita has been falling each decade compared to the previous decade (the only exception being the 2010s, but that was because the 2008-09 crash was so massive). Economists and environmentalists have long argued about the merits of a “no-growth” economic strategy. These numbers show that we’re pretty much there already…
Thanks Howard. Appreciated, and agreed
Is that blog out yet?
Thanks Howard. And during the period of greatest growth, the state was investing in infrastructure – roads and houses and public services and so on – and the top tax rates in the UK and the US were much much higher than they are today.
From the late 70s/early 80s onwards, pursuit of true increase in productivity – making a profit by doing something better – has been replaced by ever increasing financialisation which seeks ever greater economic rents. Products are lower quality, pay and conditions for workers are worse, top tax rates are lower, and the state finds itself incapable of funding current needs let alone investment.
Perhaps AI will create a new industrial revolution that will raise living standards of all eventually but in the short term to me it seems more likely it will create a small number of ever richer billionaires who have more money than they can ever spend, and impoverish everyone else. A new gilded age floating on a sea poverty.
Much to agree with
I think Labour are doing an awful job but what worries me is that when Reform are parachuted into power they will enable the finance sector and ignore the rest of the economy to an even greater degree and slash taxes to sell off more assets and ultimately the NHS which Nigel Farage hates
If only there was a way to measure humility.
To me it’s easy.
Everyone sits there pretending that there is no money – that all the money ever produced is all that we have.
It’s a complete negation of reality. A fiction.
You cannot have growth without real investment.
Money comes, money goes. But mostly it has to keep coming and going.
Under a Labour government, the state is abnegating its responsibility, but is happy to have a bloated CBRA and no doubt planning to bail out the private sector again when the search for ‘growth’ goes belly up again.
The gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.
Robert F. Kennedy, University of Kansas, March 18, 1968
Agreed
as Benjamin Franklin said “Money has never made man happy, nor will it, there is nothing in its nature to produce happiness. The more of it one has the more one wants.”
My mother used to say “Money doesn’t make you happy but you can be miserable in comfort “. Our family used to have some rich relatives (all gone now). None of them were very happy. They spent too much time counting it and worrying about losing it.
Issues I will address.
Money can’t buy happiness but I would at least like to have enough income to retire on, without worrying if the basics, and heating and eating can be afforded. Not too much to ask I think.
Many economists, possibly a majority, do not believe GDP is a valid way to measure the size of the economy for the very reasons stated by Robert Kennedy. It does not include the wellbeing of the population. And the purpose of economics, if it has one, is to increase that wellbeing given that resources are finite.
92% of economists are orthodox.
It is thought 8% are heterodox.
How does your hypothesis fit with that?
From what I’ve read and understood, even orthodox economics is taught with specific references to the externalities that although not easy to quantify, are just as important to human welfare as the measurable flows of money around the economy. I did say ‘economists’, which on reflection, was wrong, because professional economists invariably focus on what is measurable. Perhaps I should have said something like ‘progressive economic thought’ rather than professional economists. Mia culpa.
That now makes sense,
Acknowledgement of the existence of externalities is then followed by the assumption that they are immaterial and so can be ignored because markets would have priced them if they were signifcant.
The second point above is interesting: “Real GDP is estimated to have grown by 0.5% in the three months to May 2025, compared with the three months to February 2025, largely driven by growth in the services sector in this period”. This seems odd set against the other figures.
Budget speeches usually include a positive forecast of “Real GDP” five years ahead. Nobody ever challenges this.
The ONS say of real GDP:
“..seasonally adjusted GDP series are used to calculate the GDP deflator (rather than the not seasonally adjusted GDP series for current and constant prices) because some components of the GDP series for constant prices are collected on an annual calendar year basis, and the quarterly series are then interpolated from that series, and the ONS advise that the seasonally adjusted quarterly GDP series for constant prices is the more reliable series for the purposes of calculating the GDP deflator.”
and
“The GDP deflator is a much broader price index than the CPI, RPI (which only measure consumer prices), or PPI as it reflects the prices of all domestically produced goods and services in the economy. Hence, the GDP deflator also includes the prices of investment goods, government services and exports, and excludes the price of UK imports. The wider coverage of the GDP deflator makes it more appropriate for deflating public expenditure series.”
In other words, it’s a fudge dressed up in pseudobabble.
My own figures for real per capita GDP – note the ONS say nothing about per capita – show a 29.7% fall in 16 years from 2007 to 2023, using the RPI which makes more sense to the public.
We are being hoodwinked with meaningless numbers.
Please share your figures and their basis of calculation.
Table 1 in Reinventing Democracy, you have it in an email from me. The data can be downloaded using this link:
https://www.sparklingbooks.com/user/downloads/RD_table1.pdf
But the Office for Budget Responsibility monthly data bank suggests GDP in 2023 was £2,700 bn. You data appears to be inaccurate. Where does it come from? https://obr.uk/download/public-finances-databank-june-2025/?tmstv=1752330740
You are correct, the 2023 figure is wrong. I suspect a dyslexic typo that slipped through. I have just checked ONS table YBHA which was my source and it shows £2,720 bn.
It will take a week or two to correct this as it has to go to the designer. Thank you for finding it. I will email you when the correction is published.
Thanks