February 25, 2024

New forecasts: The British economy outperforms Germany

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Surprising new predictions: Over the next 15 years, the UK economy will be the best performing in Europe. Germany is losing momentum.

The UK will become Europe's best-performing major economy over the next 15 years, narrowing the gap with Germany and widening its lead over France, according to new long-term forecasts. The Center for Economics and Business Research expects GDP growth in the United Kingdom to stabilize between 1.6 and 1.8 percent by 2038, helping the country maintain its position as the sixth largest economy in the world.

Forecasts published on Tuesday suggest the UK will emerge from years of economic stagnation marked by Brexit and a series of shocks, including the pandemic and rising inflation.

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The British economy is growing faster than the Eurozone

The UK economy has been hobbled by weak productivity growth since the financial crisis, and labor supply problems have emerged in recent years. This has led the Bank of England to become more pessimistic about the UK's growth prospects in the coming years.

According to CEBR's long-term global economic rankings, the UK is expected to grow faster than the four major eurozone economies – France, Germany, Italy and Spain – but not as fast as the US.

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“The fundamentals of the UK economy remain very strong,” said Pushbeen Singh, chief economist at CEBR. “London’s position as a center for financial and advisory services remains strong and, combined with the overall strength of the services sector across the UK, will drive UK growth.”

He said the economic impact of Brexit “has either been exaggerated or has not yet been adequately researched.”

Bank of England in London (avatar). © Tayfun Salsi/Imago

China is replacing the United States as the world's largest economy

The economic consulting firm expects that China will overtake the United States as the world's largest economy in 2037 and that global GDP will double as emerging markets catch up with developed countries.

By 2038, Italy will disappear from the world's ten largest economies and be replaced by South Korea. The United States and Germany will fall in the rankings, while India and Brazil – two populous developing countries – will move into the top ten.

Singh said France would fall behind the UK mainly because of its large public sector and high taxes, while a slowdown in production in Germany would help the UK catch up.

©2023 Bloomberg L.P

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