August 14, 2023 - 11:55am
A chart from the Financial Times’s chief data reporter John Burn-Murdoch, comparing the GDP of UK cities and regions with those in other countries, received a great deal of attention over the weekend.
Because the two countries are roughly the same size, the comparison with Germany is especially relevant — and dispiriting. It’s not just that the UK is poorer on average, but that if the richest area is removed from each country (in Britain’s case, London) then it is much poorer. As Burn-Murdoch puts it: “Britain is a poor country with one wealthy region.”
Another chart, this one created by John Handley using OECD data, makes a similar point. It compares per capita household income in each of the UK and German regions. Four UK regions, all of them in southern England, collectively do perfectly fine. However, the other eight UK regions take the eight lowest places in the Anglo-German league table — i.e. they’re all poorer than the poorest Germany region. It is true that London is richer than even the richest German region, but that’s of scant comfort to the people of the Midlands, Northern England, Scotland, Wales and Northern Ireland.
But before we buy too deeply into the idea that Britain is a poor country (apart from London) a couple of points should be taken on board.
First, it should be no surprise that the Germans are richer, given their remarkable success in getting other countries to pay for their stuff. For instance, the country’s defence is kindly provided by the Americans — and, to a lesser extent, by the not completely hopeless British and French armed forces. Characteristically, Germany is already going soft on its promise to harden up its own defences.
Then there’s the contribution made by other member states to German industrial policy. The EU budget provides regional development funds for upgrading infrastructure in Central and Eastern Europe — i.e. the export market on Germany’s doorstep and the low wage labour pool for outsourced German-owned industry. German exports are further subsidised by the distortions of the single currency, which has locked in a favourable exchange rate for the country and a disastrous one for Italy. And let’s not forget all that nice cheap energy from the Russians — secured at the cost of Europe’s security.
The second point is that on comparing Britain to the other similarly-sized European economies — i.e. France, Italy and Spain — it doesn’t look like such a poor country after all. Handley’s charts, which take local purchasing power into account, are especially interesting. For instance, though Scotland is poorer than every Germany region, it is richer than all but three French regions.
None of this means that the UK doesn’t need to address its structural weaknesses. We absolutely must sort out the housing crisis in the South and the productivity crisis in the North. But if complacency is an obstacle to progress, then so is self-indulgent despair. By the standards that really matter, Britain is a rich nation, with the potential to be richer still.
Peter Franklin is Associate Editor of UnHerd. He was previously a policy advisor and speechwriter on environmental and social issues.
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SubscribeSomething’s gone seriously wrong with the FT over the past 15 years or so. It used to be a reliable, factually based source of news and analysis. Now, it’s just another agenda-pushing media outlet.
This is a typical case. Here we have a so-called “chief data reporter” who thinks it is somehow acceptable to strip the top 10% of the UK population (that’s Greater London) from a comparison in order to create the impression he wants to create.
It’s such obvious nonsense. Germany’s largest cities are far smaller than London, so there are immediate difficulties in comparing the two countries.
I’ve travelled and worked in both the UK and Germany over the past 35 years. From my own experience, there used to be a large gap between German and UK salaries and standard of living. That gap closed – certainly for London and the South East – two decades ago.
The UK is far from perfect, but still far better positioned for the future than Germany is. Once (or rather if) we stop wasting our time and resources on the government-sponsored nonsense and over-regulation and importing armies of low-skilled labour, the productivity gap will close.
“but still far better positioned for the future ”
That is what everyone used to say in 2006/7 (when I first moved to UK from USA) about the future of UK trade with China/India/Asia.
I can not speak about the 70s/80s/90s but I have travelled for work across Germany (including in the East – Berlin, Jena, Leipzig, Dresden, Chemnitz) since 2006.
Simply put Germany is a richer country with a higher quality of life. Even simple things (bread, air tight windows, recycling/rubbish collection) are better done. Berlin (the biggest city) is much cleaner than London (though poorer).
Cultural life (if it is your thing) from museums to classical music is way better in Leipzig or Dresden or Hannover than any other UK city (London aside).
I agree with much of what you say. When the Germans set their mind to doing something, they invariably do it properly and well. And the gap between what is “best” and “worst” is much smaller. I visited the former East Germany for the first time last year and was generally very impressed (the clearly poorest part being on the Polish border). And Berlin is a very livable city in a way that London hasn’t been for decades.
That said, the whole German model is incredibly exposed to factors like a huge legacy automotive sector in long term decline and fundamental weaknesses in finance and services. Plus self-destructive energy policies.
Well, I have to say, Berlin was not at all clean when I was there a couple of days ago and neither was Hamburg. The train between the two definitely left something to be desired……
It’s a common joke how the EU is obsessed with standards and norms, but it works. I’m still surprised by how any given thing in Germany (bread, bakery, meat, even kebab) will by definition be of superior quality to its UK equivalent (and not more expensive) unless it’s the “artisan” and very expensive variety in UK.
Having lived in Germany for eight years before returning to the UK, I largely agree. Public transport in particular is vastly superior in Germany compared to the UK (with the exception of London).
I wouldn’t necessarily agree with you on cultural life though. Football is definitely cheaper overall in Germany, which also has much more terracing and a better atmosphere at games, at least when comparing the Bundesliga to the English Premier League.
But there are few places with a better choice of gig venues than Glasgow, and Edinburgh takes some beating when it comes to museums, galleries and the cultural life.
I agree with much of what you say. When the Germans set their mind to doing something, they invariably do it properly and well. And the gap between what is “best” and “worst” is much smaller. I visited the former East Germany for the first time last year and was generally very impressed (the clearly poorest part being on the Polish border). And Berlin is a very livable city in a way that London hasn’t been for decades.
That said, the whole German model is incredibly exposed to factors like a huge legacy automotive sector in long term decline and fundamental weaknesses in finance and services. Plus self-destructive energy policies.
Well, I have to say, Berlin was not at all clean when I was there a couple of days ago and neither was Hamburg. The train between the two definitely left something to be desired……
It’s a common joke how the EU is obsessed with standards and norms, but it works. I’m still surprised by how any given thing in Germany (bread, bakery, meat, even kebab) will by definition be of superior quality to its UK equivalent (and not more expensive) unless it’s the “artisan” and very expensive variety in UK.
Having lived in Germany for eight years before returning to the UK, I largely agree. Public transport in particular is vastly superior in Germany compared to the UK (with the exception of London).
I wouldn’t necessarily agree with you on cultural life though. Football is definitely cheaper overall in Germany, which also has much more terracing and a better atmosphere at games, at least when comparing the Bundesliga to the English Premier League.
But there are few places with a better choice of gig venues than Glasgow, and Edinburgh takes some beating when it comes to museums, galleries and the cultural life.
“but still far better positioned for the future ”
That is what everyone used to say in 2006/7 (when I first moved to UK from USA) about the future of UK trade with China/India/Asia.
I can not speak about the 70s/80s/90s but I have travelled for work across Germany (including in the East – Berlin, Jena, Leipzig, Dresden, Chemnitz) since 2006.
Simply put Germany is a richer country with a higher quality of life. Even simple things (bread, air tight windows, recycling/rubbish collection) are better done. Berlin (the biggest city) is much cleaner than London (though poorer).
Cultural life (if it is your thing) from museums to classical music is way better in Leipzig or Dresden or Hannover than any other UK city (London aside).
Something’s gone seriously wrong with the FT over the past 15 years or so. It used to be a reliable, factually based source of news and analysis. Now, it’s just another agenda-pushing media outlet.
This is a typical case. Here we have a so-called “chief data reporter” who thinks it is somehow acceptable to strip the top 10% of the UK population (that’s Greater London) from a comparison in order to create the impression he wants to create.
It’s such obvious nonsense. Germany’s largest cities are far smaller than London, so there are immediate difficulties in comparing the two countries.
I’ve travelled and worked in both the UK and Germany over the past 35 years. From my own experience, there used to be a large gap between German and UK salaries and standard of living. That gap closed – certainly for London and the South East – two decades ago.
The UK is far from perfect, but still far better positioned for the future than Germany is. Once (or rather if) we stop wasting our time and resources on the government-sponsored nonsense and over-regulation and importing armies of low-skilled labour, the productivity gap will close.
Saying that Britain is not a poor country – over and over like a mantra – will lead Britain to become a poor country.
Because we are not poor we can take the lead in the insane rush to NetZero, which will make us poor.
Britain is a country made up of victims so we think we are poorer than we are and efforts go towards getting ‘compo’ instead of self improvement.
We are morally poor.
Agreed -our political class are useless. NetZero will make us poor but the good news it can all be blamed on BREXIT…the FT and the Economist seem to despise the country. (We are not from there!) So does the BBC natch, but it focuses its sights on the “English” who don’t exist according to a recent Economist article.
Agreed -our political class are useless. NetZero will make us poor but the good news it can all be blamed on BREXIT…the FT and the Economist seem to despise the country. (We are not from there!) So does the BBC natch, but it focuses its sights on the “English” who don’t exist according to a recent Economist article.
Saying that Britain is not a poor country – over and over like a mantra – will lead Britain to become a poor country.
Because we are not poor we can take the lead in the insane rush to NetZero, which will make us poor.
Britain is a country made up of victims so we think we are poorer than we are and efforts go towards getting ‘compo’ instead of self improvement.
We are morally poor.
Britain may not be as poor as some imagine, but neither is it as rich as our leaders need it to be in order to satisfy their great power fantasy. In pursuit of this they commit this nation to obligations that it cannot possibly meet: A seaborn nuclear deterrent that it cannot afford, and which I strongly suspect it could not deploy without US permission; A pair of super carriers (sans planes) to defend a now non-existent empire from a non-existent threat, when a fleet of gunboats to defend our borders would be of more use (I believe that we now have more admirals than ships – the very definition of Ruritania); And of course, our leaders current obsession with leading the world in the fight against climate change (PS, nobody is following). At home, we incur debts that we will never repay (We will eventually default through the well worn mechanism of inflation) and our sole economic policy is to import cheap labour to paper over the ever-widening cracks in our welfare system. If we behaved in a sane manner we would find that we are wealthy enough to lead a decent life.
Britain may not be as poor as some imagine, but neither is it as rich as our leaders need it to be in order to satisfy their great power fantasy. In pursuit of this they commit this nation to obligations that it cannot possibly meet: A seaborn nuclear deterrent that it cannot afford, and which I strongly suspect it could not deploy without US permission; A pair of super carriers (sans planes) to defend a now non-existent empire from a non-existent threat, when a fleet of gunboats to defend our borders would be of more use (I believe that we now have more admirals than ships – the very definition of Ruritania); And of course, our leaders current obsession with leading the world in the fight against climate change (PS, nobody is following). At home, we incur debts that we will never repay (We will eventually default through the well worn mechanism of inflation) and our sole economic policy is to import cheap labour to paper over the ever-widening cracks in our welfare system. If we behaved in a sane manner we would find that we are wealthy enough to lead a decent life.
UK has struggled economically since WW1. Following WW11 its productivity dipped spectacularly vis a vis USA and some of Europe and Japan, before being ‘saved’ by financial deregulation and the surge of the square mile. So none of this is new. It is being pushed again now as an advert for rejoining the EU by those institutions who wish to make even more profits, even though when we were members the same low productivity continued unabated save, as I said, in financial services. Even in Germany though 2 million rely on food banks. We are all in trouble (apart from tbe banks…)…
Correct sir, productivity has been an issue ever since the 2nd stage of the industrial revolution (auto, pharma, chemicals, optical, electric, etc.).
There are other studies (Belgian/Dutch – Catholic University of Leuven – if I remember correctly) that claims UK fell behind on productivity once the coal/steel/steam technology became mature.
Accumulated wealth hid the productivity decline.
Did I oversleep? Who won?
😉
Correct sir, productivity has been an issue ever since the 2nd stage of the industrial revolution (auto, pharma, chemicals, optical, electric, etc.).
There are other studies (Belgian/Dutch – Catholic University of Leuven – if I remember correctly) that claims UK fell behind on productivity once the coal/steel/steam technology became mature.
Accumulated wealth hid the productivity decline.
Did I oversleep? Who won?
😉
UK has struggled economically since WW1. Following WW11 its productivity dipped spectacularly vis a vis USA and some of Europe and Japan, before being ‘saved’ by financial deregulation and the surge of the square mile. So none of this is new. It is being pushed again now as an advert for rejoining the EU by those institutions who wish to make even more profits, even though when we were members the same low productivity continued unabated save, as I said, in financial services. Even in Germany though 2 million rely on food banks. We are all in trouble (apart from tbe banks…)…
I am not convinced ”the two countries (UK and Germany) are roughly the same size”.
German defence: you are bang on: US/UK & less so France pick up the German defence tab. Long may that continue! – but Germany should pay US/UK/France proportinatly the 1% Germany does not spend on defence. We dont want Germany to starty spending the full 2% of a giant economy on defence. Should we not learn from the past?
German off-balance sheet liabilities: No one ever takes into account the 10 trillion euro ECB liability that (technically or not) Germany has – by being the joint & several Guarantour and lender of last resort undeerpinning ECB Debt. (I wonder if German people know this)
Whilst UK Debt/GDP maybe just over 100% – with little or almost zero ”shadow banking” – and whislt German debt to GDP is ”officially” around 65% – in actual fact Germand debt/GDP is around 300% where all of German ECB and Shadow liabilities are called upon.
People often dismiss this as ‘yeah but it will nevr happen’‘ – oh riiiiiight. Its either a liability or it isnt – one cannot be a little bit pregnant (apparently!)
Even the EU Poster Child Ireland (just out of recession btw) with its fake GDP, is not much better – due to its own off-balance sheet shadow banking liabilities – but thats another story.
Check it out.
Good point about the Target2 system. Germany is owed over 1 trillion euros in cash transfers alone – that’s before the underwriting liabilities you refer to – and under ECB rules, no interest is earned on the balance.
It’s therefore questionable, given that there is no hope of the sum ever getting repaid, whether it is even legal for the Bundesbank to claim that the debt is still a balance sheet asset at all: under standard accounting conventions it ought to be written off.
But of course the ECB couldn’t ever allow such a thing to happen, and of course the German taxpayer isn’t going to like the prospect of supporting their own central bank if this happens. So the pretence continues.
An extra 1% of defense budget would not hurt German productivity. That extra money will mostly be recycled through German companies/consumption (tanks, fighters, soldier wages, etc.) Not the best economic multiplier but still it wouldn’t hurt the economy.
Off Balance sheet – unless you think Bubba will ask for its money back tomorrow (do you?) it is not a problem. If Off balance sheet loans are “called in” we are all broke. I am the whole Western/Industrialized world (including Japan, Korea, Taiwan, China). I know you think you understand the financial system but you don’t.
Good point about the Target2 system. Germany is owed over 1 trillion euros in cash transfers alone – that’s before the underwriting liabilities you refer to – and under ECB rules, no interest is earned on the balance.
It’s therefore questionable, given that there is no hope of the sum ever getting repaid, whether it is even legal for the Bundesbank to claim that the debt is still a balance sheet asset at all: under standard accounting conventions it ought to be written off.
But of course the ECB couldn’t ever allow such a thing to happen, and of course the German taxpayer isn’t going to like the prospect of supporting their own central bank if this happens. So the pretence continues.
An extra 1% of defense budget would not hurt German productivity. That extra money will mostly be recycled through German companies/consumption (tanks, fighters, soldier wages, etc.) Not the best economic multiplier but still it wouldn’t hurt the economy.
Off Balance sheet – unless you think Bubba will ask for its money back tomorrow (do you?) it is not a problem. If Off balance sheet loans are “called in” we are all broke. I am the whole Western/Industrialized world (including Japan, Korea, Taiwan, China). I know you think you understand the financial system but you don’t.
I am not convinced ”the two countries (UK and Germany) are roughly the same size”.
German defence: you are bang on: US/UK & less so France pick up the German defence tab. Long may that continue! – but Germany should pay US/UK/France proportinatly the 1% Germany does not spend on defence. We dont want Germany to starty spending the full 2% of a giant economy on defence. Should we not learn from the past?
German off-balance sheet liabilities: No one ever takes into account the 10 trillion euro ECB liability that (technically or not) Germany has – by being the joint & several Guarantour and lender of last resort undeerpinning ECB Debt. (I wonder if German people know this)
Whilst UK Debt/GDP maybe just over 100% – with little or almost zero ”shadow banking” – and whislt German debt to GDP is ”officially” around 65% – in actual fact Germand debt/GDP is around 300% where all of German ECB and Shadow liabilities are called upon.
People often dismiss this as ‘yeah but it will nevr happen’‘ – oh riiiiiight. Its either a liability or it isnt – one cannot be a little bit pregnant (apparently!)
Even the EU Poster Child Ireland (just out of recession btw) with its fake GDP, is not much better – due to its own off-balance sheet shadow banking liabilities – but thats another story.
Check it out.
Economic policy in the UK is short term. Industrial policy seems to be non-existent. That is not the case in Germany. Part of this may be due to the different laws which allow banks a seat on the board of Germany companies but (apparently) not in those of the UK. Being on the board makes long-term lower rate returns from engineering and manufacturing more acceptable. Without that long-term stability highly complex industries that generate log-term wealth cannot survive never mind start up. In the UK finance is like a casino. If you want a skilled, productive economy (and productivity is key to wealth and living standards) you need long term industrial and economic strategy and the UK doesn’t. The UK is a low skill economy compared to Germany. The British simply can’t plan and are ruled by incompetents. It really is all fur coat (parading the world as a global force, aircraft carriers) and no knickers (poverty, low productivity).
Many Germany capital owners are fully committed to their companies. Mittelstands could sell out (and some do – see Viessman to Carrier) but most do not. The owners live and work in the same villages as their workers. Their children go to the same schools.
That is a cultural trait – you can not legislate for that.
Many Germany capital owners are fully committed to their companies. Mittelstands could sell out (and some do – see Viessman to Carrier) but most do not. The owners live and work in the same villages as their workers. Their children go to the same schools.
That is a cultural trait – you can not legislate for that.
Economic policy in the UK is short term. Industrial policy seems to be non-existent. That is not the case in Germany. Part of this may be due to the different laws which allow banks a seat on the board of Germany companies but (apparently) not in those of the UK. Being on the board makes long-term lower rate returns from engineering and manufacturing more acceptable. Without that long-term stability highly complex industries that generate log-term wealth cannot survive never mind start up. In the UK finance is like a casino. If you want a skilled, productive economy (and productivity is key to wealth and living standards) you need long term industrial and economic strategy and the UK doesn’t. The UK is a low skill economy compared to Germany. The British simply can’t plan and are ruled by incompetents. It really is all fur coat (parading the world as a global force, aircraft carriers) and no knickers (poverty, low productivity).
I am currently in Germany after several years away. I’m a professional linguist and previously worked in business development, opening and running 2 businesses in Germany.
The German teacher friend I’m visiting is not happy with the turn of events in Germany.
The German railways used to be a byword for German reliability. My experience today confirmed everything my friend Steffi has been saying. Frankly, very poor. Late trains, getting later as I went. Cancellations, “replacement” trains leaving the scheduled platform at the scheduled time but with a different train composition such that reservations were invalidated. Gross overcrowding. Train information hard to come by. The DB app not reflecting changes.
She had a long list of other gripes.
It’s a shame there is no objective attempt made to benchmark different national situations and trends.
I am currently in Germany after several years away. I’m a professional linguist and previously worked in business development, opening and running 2 businesses in Germany.
The German teacher friend I’m visiting is not happy with the turn of events in Germany.
The German railways used to be a byword for German reliability. My experience today confirmed everything my friend Steffi has been saying. Frankly, very poor. Late trains, getting later as I went. Cancellations, “replacement” trains leaving the scheduled platform at the scheduled time but with a different train composition such that reservations were invalidated. Gross overcrowding. Train information hard to come by. The DB app not reflecting changes.
She had a long list of other gripes.
It’s a shame there is no objective attempt made to benchmark different national situations and trends.
What is wrong with this guy?!
productivity (and that is the only thing that matters)
Germany – 68.85
UK – 54.35
Sorry for the obtuse question (which is a genuine one). Are you saying because Germany is outputting more, that its still fair to say that the UK is lagging behind?
Yes and no.
The question is what is your benchmark? You have to compare UK with other countries. It would be unfair to compare UK with Norway (Oil/Gas – small population) or Lux (small population) or Singapore (semi- authoritarian city state).
I would say the better benchmark would be France. Both countries have similar populations and a dominant city (Paris/London).
Yes and no.
The question is what is your benchmark? You have to compare UK with other countries. It would be unfair to compare UK with Norway (Oil/Gas – small population) or Lux (small population) or Singapore (semi- authoritarian city state).
I would say the better benchmark would be France. Both countries have similar populations and a dominant city (Paris/London).
Sorry for the obtuse question (which is a genuine one). Are you saying because Germany is outputting more, that its still fair to say that the UK is lagging behind?
What is wrong with this guy?!
productivity (and that is the only thing that matters)
Germany – 68.85
UK – 54.35
Most of western Europe is “poorer” – as measured by per capita GDP – than most of America. Until recently, America’s poorest state, Mississippi, had a higher oer capital income than all but a few wealthy European metros, such as London, or Lichtenstein.
The obvious reasons are in the structures of these countries’ economies. The freer any country’s private sector is, the wealthier that country will be. This is why France is poorer than England, and England is poorer than Germany, and Germany is poorer than the United States.
Mississippi is part of US and it gets large subsidies (directly and indirectly from the Central GOV) . It is a stupid comparison.
It makes no sense to compare UK with Mississippi or Australia/Canada/Norway ( countries heavily reliant on natural resources).
Mississippi is part of US and it gets large subsidies (directly and indirectly from the Central GOV) . It is a stupid comparison.
It makes no sense to compare UK with Mississippi or Australia/Canada/Norway ( countries heavily reliant on natural resources).
Most of western Europe is “poorer” – as measured by per capita GDP – than most of America. Until recently, America’s poorest state, Mississippi, had a higher oer capital income than all but a few wealthy European metros, such as London, or Lichtenstein.
The obvious reasons are in the structures of these countries’ economies. The freer any country’s private sector is, the wealthier that country will be. This is why France is poorer than England, and England is poorer than Germany, and Germany is poorer than the United States.
Government mediocrity and the hapless private section will see to it that Britain continues to drop in comparison to other countries until developing-country status is where it lands.
Government mediocrity and the hapless private section will see to it that Britain continues to drop in comparison to other countries until developing-country status is where it lands.
London is not rich due to an oversight in planning. London is rich because it attracts and retain international talent from all over the world. It’s not a model that’d be possible, or likely desirable outside London. David Cameron had some aspirations for a model that wouldn’t rely on the London model, but he managed himself out of his job fairly early on.
London is not rich due to an oversight in planning. London is rich because it attracts and retain international talent from all over the world. It’s not a model that’d be possible, or likely desirable outside London. David Cameron had some aspirations for a model that wouldn’t rely on the London model, but he managed himself out of his job fairly early on.