Bswud

Foundations

2009-04-03 · 00:00 UTC ·75 min read

Brief

This comprehensive analysis argues that Britain's economic malaise since 2008 results from systematic barriers to building essential infrastructure, not from Brexit, austerity, or cultural factors. The authors trace the problem to the 1947 Town and Country Planning Act, which transformed Britain from having the world's most liberal development system to its most restrictive. This created a vicious cycle: housing shortages prevent workers from moving to productive cities, infrastructure costs have exploded (making projects unviable), and energy costs have soared due to premature nuclear phase-out and expensive renewable subsidies. The essay demonstrates how France, despite higher taxes and regulation, achieves superior productivity through abundant housing (37M vs 30M homes), better infrastructure (29 vs 7 tram networks), and cheap nuclear power (70% of electricity). Britain's infrastructure costs have become extreme due to centralized funding without accountability - the Lower Thames Crossing planning alone cost £297M, more than Norway spent building the world's longest road tunnel. The authors argue this creates a 'missing middle' where only the very wealthy and very poor can afford productive cities, while energy-intensive industries flee due to costs 60% higher than France. However, they see cause for optimism, drawing parallels to the 1930s housing boom that helped Britain avoid the Great Depression. The solution involves removing regulatory barriers to private investment in housing, transport, and energy - particularly nuclear power, where South Korea builds reactors at 1/6th Britain's cost through standardized designs and learning-by-doing. If Britain achieved this transformation, the authors calculate it could generate a £170B budget surplus instead of current deficits, while enabling the agglomeration effects that drive innovation in sectors like AI and biotech.

Why it matters

Britain's economic stagnation stems from a fundamental inability to build essential infrastructure:

Key details

  • [energy] Industrial electricity prices tripled 2004-2021; UK generates 2/3 the electricity per capita of France, 1/3 of US levels
  • [housing] UK has 7 million fewer homes than France despite equal populations; house prices double construction costs vs 1/3 premium in US
  • [infrastructure] HS2 costs 4-8x more per mile than French/Italian high-speed rail; Britain hasn't built a reservoir since 1992
  • [nuclear] Last nuclear plant built 1987-1995; Hinkley Point C costs 4-6x more per MW than South Korean reactors
  • [productivity] If Britain had maintained 1979-2008 growth trends, GDP per capita would be £41,800 vs £33,500 today
Cleaned source text

title: Foundations

content_type: article

publication: Bswud

published: 2009-04-03T00:00:00

source_url: https://ukfoundations.co/

word_count: 16894

Foundatio ns

Why Britain has stagnated

Setting the scene

Here are some facts to set the scene about the state of the British economy.

Between 2004 and 2021, before Russia’s invasion of Ukraine,

the industrial price of energy tripled in nominal terms, or doubled relative to consumer prices.

With almost identical population sizes, the UK has under

30 million homes, while France has around37 million.800,000 British familieshave second homes compared to3.4 million French families.

Per capita electricity generation in the UK is just two thirds of

what it is in France (4,800 kilowatt-hours per year in Britain

versus 7,300 kilowatt-hours per year in France) and barely over a

third of what it is in the United States (12,672 kilowatt-hours

per year). We are

closer to developing countries like Brazil and South Africain terms of per capita electricity output than we are to Germany, China, Japan, Sweden, or Canada.

Britain’s last nuclear power plant

was built between 1987 and 1995. Its next one,Hinkley Point C, is between fourandsix timesmore costly per megawatt of capacity than South Korean nuclear power plants, andone-and-a-half times as expensiveas those that South Korea’s KEPCO has agreed to build in Czechia.

Tram projects in Britain are

two and a half times more expensivethan French projects on a per mile basis. In the last 25 years, France has built21 tramwaysin different cities, including cities with populations of just 150,000, equivalent to Lincoln or Carlisle. The UK has still not managed to build a tramway in Leeds, the largest city in Europe without mass transit, with a population of nearly 800,000.

At £396 million,

each mile of HS2 will cost more than four times morethan each mile of the Naples to Bari high speed line. It will be more than eight times more expensive per mile than France’s high speed link between Tours and Bordeaux.

Britain

has not built a new reservoir since 1992. Since then, Britain’s population has grown by 10 million.

Despite huge and rising demand, Heathrow annual flight numbers

have been almost completely flat since 2000. Annual passenger numbers have risen by 10 million because planes have become larger, but this still compares poorly to the 22 million added at Amsterdam’s Schiphol and the 15 million added at Paris’s Charles de Gaulle. The right to take off and land at Heathrow once per week is worthtens of millions of pounds.

The planning documentation for the Lower Thames Crossing, a

proposed tunnel under the Thames connecting Kent and Essex, runs

to 360,000 pages, and the application process alone has cost £297

million. That is

more than twice as muchas it cost in Norway to*actually build*the longest road tunnel in the world.

These are not just disconnected observations. They highlight the most important economic fact about modern Britain: that it is difficult to build almost anything, anywhere. This prevents investment, increases energy costs, and makes it harder for productive economic clusters to expand. This, in turn, lowers our productivity, incomes, and tax revenues.

Everyone reading this will already be aware of the country’s present

economic sclerosis. Real wage growth has been flat for 16 years.

Average weekly wages are only

0.8 percent

higher today than their previous peak in 2008. Annual real wages are

6.9 percent lower* for the median full-time worker today

than they were in 2008. This essay argues that Britain’s economy has

stagnated for a fundamentally simple reason: because it has banned

the investment in housing, transport and energy that it most vitally

needs. Britain has denied its economy the foundations it needs to

grow on.

From 2010 to the summer of 2024, Britain was run by Conservative-led or Conservative Governments. The Conservatives are the traditional party of business, and in the 1930s and 1980s they pushed through reform programmes that successfully renewed Britain’s economy. Virtually any Conservative minister from the past fourteen years would speak warmly about that heritage if asked, and would express the hope of being its inheritor. And yet, with honourable exceptions, the governments of the last fourteen years failed in this vocation. Failing systems remained unreformed, continuing to stifle Britain’s prosperity. Today Britain is ruled by a Labour Government that recognises this failure to build, and which has articulated high ambitions for changing this. But it remains doubtful that they will be any better at delivering on those ambitions than the Conservatives were.

Constitutionally, British governments have immense power. How has a series of governments with both the will and the means to deliver systemic reform failed to do so? How can it be that the overwhelming experience reported by former ministers and advisors is one of disempowerment – of a ‘blob’ operating beyond their control, of pulling levers and nothing happening, of a vast dysfunctional machine slowly disintegrating on autopilot?

We believe that Britain’s political elites have failed because they do not understand the problems they are facing. No system can be fixed by people who do not know why it is broken. Like the elites of Austria-Hungary, Qing Dynasty China, or the Polish Commonwealth, they tinker ineffectually, mesmerised by the uncomprehended disaster rising up before them.

If any government, Conservative or Labour, wishes to use its powers to improve the country, it needs to understand which of Britain’s institutions have failed, and why they have done so. Only then can they begin to develop a systematic programme of reform that will restore Britain’s economy to strength and its society to vitality. The alternative is continued drift, relative decline, political disenchantment, and a nation unable to meet the great challenges of our time. This essay is a first attempt at offering such a diagnosis.

Falling behind

Britain is a country of immense achievement. For most of modern history, its people were the richest, healthiest and best educated in the world. Its housing stock and its infrastructure was far more advanced than those of any of its rivals. It led the Scientific and Industrial Revolutions. Its institutions were almost uniquely liberal. Though British history contains its share of missteps and tragedies, there is probably nowhere else on earth that matches its achievements since the mid-eighteenth century, relative to its size and resource endowments.

Many of these underlying strengths remain. The British people value debate and heterodoxy. They respect science, law and institutions. In hours of crisis, like the Russian invasion of Ukraine, they display unity and good sense. However inefficient and dysfunctional they may be, British institutions are strikingly incorruptible. One of the scandals of the decade is the alleged embezzlement of a campervan, an offence that would surely bring a contemptuous smile to the lips of a Putin or a Berlusconi.

Despite these strengths, Britain is falling behind the developed world in economic dynamism. It led the world in the nineteenth century, and then Europe during the first half of the twentieth, but it lost its leadership after the Second World War. Since 2008, it has been clearly underperforming most of the developed world, even some of its more heavily taxed and regulated continental neighbours.

Most popular explanations for this are misguided. The Labour

manifesto

blamed slow British growth on a lack of ‘strategy’ from the Government, by which it means not enough targeted

investment winner picking, and too much inequality. Some economists

say that the UK’s economic model of private capital ownership is

flawed, and

that limits on state capital expenditure are the fundamental

problem. They also point to more state spending as the solution, but

ignore that this investment would face the same barriers and high

costs that existing infrastructure projects face, and that deters

private investment.

Others believe that our ageing society means permanently lower

growth and higher taxes. Dietrich Vollrath’s book

Fully Grown: Why a Stagnant Economy is a Sign of Success

says that slower growth is an inevitable part of becoming

services-driven

(and of birth rates declining). Another school of thought sees

Britain’s 2010s performance as ‘one thing after another’, with a

slow recovery from the financial crisis followed by Brexit, followed

by Covid.

But all of these explanations take the biggest obstacles to growth for granted. Our economy isn’t growing for the same reason that no more planes take off or land at Heathrow today than did twenty years ago: at some point it becomes impossible to grow when investment is banned.

Over the past two decades, Britain’s economy has needed a huge quantity of new housing, transport infrastructure and energy supply. Its postwar institutions have manifestly failed to deliver these. Britain is now a place in which it is far too hard to build houses and infrastructure, and where energy is too expensive. This has meant that our most productive industries have been starved of the resources, investment and talent – the economic foundations – that they need to grow.

The UK faces other challenges besides these. Our healthcare and

higher education systems are so broken that politicians

elected on a clear mandate to cut migration