UK living standards now worse than debt-ridden Italy despite Reeves' efforts
Britain’s living standards have fallen behind those of Italy for the first time in 24 years despite Rachel Reeves’ efforts to kickstart the economy and boost growth.
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It comes after news that growth slowed down between April and June as businesses battled higher costs and Donald Trump’s tariffs came into force.
Official figures show that GDP — a measure of everything produced in the economy — expanded by just 0.3 per cent in the three months to June, slower than the first quarter of the year which saw GDP rising by 0.7 per cent.
But research from the World Bank shows that Britain’s GDP per capita, a somewhat flawed but nevertheless reliable measure of wellbeing, which divides the total GDP by a country’s population to get an average, is lower than that of Italy.
The data shows that Italy’s GDP per capita rose to $60,847 (£44,835) last year, beating Britain’s $60,620 (£44,629).
It comes as unemployment in the UK remains at a four-year high of 4.7% and inflation looks set to hit 4% in the coming months - double the Bank of England’s target.
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The data might also be skewed by population size, as Britain’s population continues growing - though much slower than previously expected due to lower levels of immigration - whereas Italy’s is on the decline.
This means that, even though the two countries’ economies are growing at a roughly similar pace, Britain’s GDP is divided over a larger number of people leading to a lower per capita figure.
This is despite Italy’s infamously high levels of government debt, sitting at a whopping 130% compared to the UK’s debt of around 101% - which is still dangerously high compared to other nations.
The figures come amid a persistent cost-of-living crisis as high inflation and taxes continue to outpace wage growth.
The latest growth figures are likely impacted by this, as households are affected by rising energy, water and council tax bills contributing to inflation.
The higher costs also hit employers in the form of higher national insurance contributions and increased minimum wages.
However, the figure of 0.3 per cent growth was stronger than the 0.1 per cent level widely expected by economists after an uptick in activity in June and revised data for earlier in the quarter.
Reacting to the figures, chancellor Rachel Reeves admitted there is "more to do" to rebuild the economy, but believed British businesses had the "key ingredients for success".
"Today's economic figures are positive with a strong start to the year and continued growth in the second quarter," Ms Reeves said.
"But there is more to do to deliver an economy that works for working people. I know that the British economy has the key ingredients for success but has felt stuck for too long.
"That is why we're investing to rebuild our national infrastructure, cutting back on red tape to get Britain building again and boosting the national minimum wage to make work pay.