Britain's Zero-Growth Economy: A Wake-Up Call for Politicians and Voters
The British economy is facing an unprecedented challenge, with the past six years marking the worst period for growth in normal peacetime since the Industrial Revolution began over two centuries ago. According to economist Paul Ormerod, small businesses hold the key to a potential £60bn boost, yet the reality of a zero-growth economy remains largely unacknowledged by both the electorate and the political class.
Stagnant Growth and Historical Context
Latest estimates from the Office for National Statistics reveal that GDP grew by a mere 0.1% in the final quarter of 2025, continuing a trend of virtual stagnation since the end of 2019. Over this period, real GDP increased at an annual rate of just 0.8%, or 0.2% per quarter on average. With the population growing at 0.7% annually, driven mainly by immigration, GDP per person has effectively seen zero growth—a precise increase of only 0.1% per year.
This stagnation is historically unprecedented in peacetime. While the Great Depression of the early 1930s saw a more severe financial crisis, it was followed by a rapid recovery, with growth of 3% in 1933 and nearly 7% in 1934. Post-war demobilisations led to contractions, but strong growth resumed as economies reintegrated military personnel. In contrast, the current zero-growth trajectory offers no such rebound, highlighting a unique economic dilemma.
Implications for Public and Private Resources
Living in a zero-growth economy means that resources for both private and public use remain unchanged. Average living standards do not rise, and any increases in public spending must be funded through higher taxes or additional government debt. Currently, government debt stands at around 100% of GDP, a high level by recent historical standards. Chancellor Rachel Reeves recognizes that bond markets have little appetite for further increases in this ratio.
High debt levels translate to significant interest payments, estimated at £120bn for the 2025/26 financial year. This amount represents approximately 8% of total public spending—triple the defence budget—and serves as a costly reminder of past borrowing. Meanwhile, taxation limits are being reached, with just 1% of income taxpayers contributing a third of the total tax revenue. Even a small exodus of wealthy individuals could have a substantial impact on public finances.
The Role of Small Businesses and Political Awareness
Small businesses could provide a £60bn injection into the economy, yet this potential remains untapped due to a lack of political and public engagement. As noted by Paul Ormerod, an Honorary Professor at the Alliance Business School, University of Manchester, neither voters nor politicians fully grasp the implications of a zero-growth economy. This disconnect hinders effective policy-making and economic revitalization efforts.
The situation echoes the famous note left by outgoing Treasury minister Liam Byrne in 2010: "I am afraid there is no money left." Today, that sentiment rings truer than ever, underscoring the urgent need for a collective awakening to the harsh realities of economic stagnation.
