Industrial production in the UK has dropped back to 1992 levels. Surprised? I was too. But the statistic jumps out on the first page of Richard Koo’s new book “The Escape From Balance Sheet Recession And The QE Trap,” which is a good read if you want to learn more about the response to the global economic crisis of 2008.
The British industry employs far fewer people than it did in the past, as the economy becomes increasingly services-dominated, but the fact that its declined to levels seen over two decades ago seems astonishing.
Sure, manufacturing hasn’t recovered as quickly as the services sector, but it’s not that bad.
He must have meant 2002, or something…
Here’s the chart:
I was wrong.
Koo’s figures are accurate to July 2014, when UK industrial production was back to about April 1993 levels. This means the UK is barely back to what it produced when John Major was still getting settled in after his election victory, and Whitney Houston’s “I Will Always Love You” was Number One in the UK.
Koo explains the European-wide industrial decline in this excerpt from his forward:
In Europe, the unemployment rate is running near the euro-era high of 12 per cent even though the European Central Bank (ECB) also cut interest rates to zero. The picture for output is even bleaker: Although German industrial production has recovered to the levels of 2007, output in France and Spain is no greater than it was in 1994 and in Italy production has fallen back to 1987 levels. United Kingdom industrial production is no higher than it was in 1992… Some have dubbed this situation “secular stagnation.”
UK production peaked in about 2000 and held more or less steady for the six or seven years running up to the financial crisis. The recession hit industry hard, but the sector was already stagnant. Part of the reason for the slowdown is due to the decline of North Sea oil production, which is included in the production figures. But a another big factor is outsourcing, as production has moved to developing countries where manufacturing is much cheaper. High energy costs in the UK haven’t helped, either.