News The UK economy post crisis: a series of unfortunate events?

The UK economy post crisis: a series of unfortunate events?


In a speech to the London South Bank University Centre for International Business Studies on Wednesday, Jon Cunliffe constructs a big picture view of how the UK economy has evolved since the Great Recession and what it means for monetary policy going forward.

“As a policymaker, occasionally it is worth standing a long way back and asking “What did I expect to happen last year and the year before? And what can I learn from what actually happened? And, crucially, ‘Have I been lulled by the ever-turning kaleidoscope of data and missed a change in the big picture?”

The recovery since the Great Recession of 2008/09 has been the slowest in modern history, slower even than that after the Great Depression. One title for the story of the last eight years is “a series of unfortunate events”.

In this big picture story, the UK is hit by a massive financial crisis as it was beginning to recover, the economy was hit by the euro-area crisis via confidence as well as financial market effects. Three years on, the economy picks up with a burst of strong growth, but pay growth and incomes respond much less, reflecting the fact that productivity growth does not recover. In the latest chapter, just as we see signs of income growth and productivity growth coming back to life, a deflationary shock from a collapse in oil prices, allied to a slump in emerging markets causes the economy to slow. Markets worry that the next chapter will be another unfortunate event.

“I would call this the ‘slow healing’ story. Recoveries from financial busts tend to be slow and painful and can take even longer if in the meantime you are hit by other bad surprises. Indeed, that is why it is worth doing all that you can – in advance and in good times – to avoid financial crisis,” Jon says.

Read the full speech here