Institute of Economic Affairs Managing Editor Daniel Freeman is joined by economic historian Tyler Goodspeed to discuss his chapter in the forthcoming book The Great Stagnation: Why Britain Stopped Growing. Their conversation examines why the UK economy never fully recovered from the 2008 financial crisis, and makes the case that post-crisis bank regulation, not austerity or planning laws, is the key driver of Britain’s growth slowdown.
Tyler explains that the UK is now around 30% poorer than it would have been on its pre-2008 trend, and would rank as the poorest US state if it were one. He argues that the real culprit is a near two-decade credit crunch: Basel Accord capital rules pushed up the cost of lending to small and medium-sized businesses, and because British firms rely far more heavily on banks for financing than their American counterparts, the effect has hit UK growth much harder. The discussion covers why rejection rates on business loan applications have climbed sharply, why this has produced a long tail of low-productivity firms unable to scale, and what policymakers on both sides of the Atlantic could do differently, from being honest about regulatory trade-offs to moving away from a one-size-fits-all approach to bank capital requirements.
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