England, Wales and Scotland section of International Socialist Alternative

Britain’s ‘return to growth’ is fragile

By Sam Morecroft, Socialist Alternative South Yorkshire

Sunak’s desperate rush to the polls is partly based on his assessment that the economy is starting to show signs of improvement. According to the latest data, the economy returned to growth of 0.6% in the first quarter of this year. However, the UK’s GDP per capita is still 0.7% lower than it was 12 months ago, and 1.2% lower than it was just before the pandemic. While the UK economy is growing more rapidly than the United States and the Eurozone in the first quarter of 2024, this is hardly significant given that these economies have grown 0.4% and 0.3% respectively.

Any growth too small to notice

Far more importantly, this technical return to growth will not be felt by anyone, and certainly not workers. Even mainstream commentators such as Faisal Islam, the BBC’s economics editor, have said that while the economy is growing, “people may not notice”. Massive inflation in the post-pandemic period, particularly in the price of food and energy, has driven a cost-of-living crisis that simply isn’t over. While inflation may be slowing down, what the Bank of England calls ‘core inflation’ was still at 4.7% in March 2024.

Prices are still increasing, just not as rapidly, and workers wages are increasing in a much slower and more limited manner than prices. The Joseph Rowntree Foundation states that post-tax earnings for the average household are still on course to be £380 per year lower at the beginning of 2025 than they were at the beginning of 2021, and that’s before the inflationary pressure began to develop!

Falling inflation does not mean that workers can expect to see falling prices either; any savings that the likes of Tesco and Sainsbury’s might see will go towards paying shareholder dividends – there will be no reduction in the cost of the weekly shop for working class people. A report by Unite the Union published in June 2023 showed that these supermarkets had made an eye-watering £3.2bn in profit in the 2021/22 financial year and planned to pay out £1.2bn of that to shareholders in 2023.

Underlying factors for recession remain

In reality, there are a multitude of different factors which have caused prices to rise: bottlenecks and labour shortages as we came out of Covid; the destabilising impact of the Russian invasion of Ukraine; the ‘greedflation’ of many major companies which have cashed in on rising prices; the impact of Brexit on export and import costs and now the conflict in the Middle East. However, the UK has experienced much higher price rises because of its crisis of productivity which in turn is down to the chronic lack of investment by the capitalist class in both its workforce and business infrastructure. Instead they have chosen to rely on the model of a low wage, unskilled workforce which has now come back to haunt them. This is why the UK economy’s feeble return to growth could quickly be thrown into reverse.

What is the way forward?

Rachel Reeves’ craven courting of big business will not improve the situation. There isn’t the economic leeway to both please big business and improve the situation for working class people, and Starmer has made it all too clear that he will side with the former. The only real solution to the economic pain and hardship that the working class is experiencing has to start by rebuilding a strike wave on pay. We need organised campaigns among the rank and file of the trade union movement to build for powerful, coordinated strike action across all sectors of the economy if we are to win any kind of economic recovery when it comes to wages and take home pay.

But even this is not enough on its own – the only real solution to the misery of capitalist economics is a socialist plan of production and distribution. Key to beginning this should be the nationalisation of the big supermarkets and energy companies, under democratic workers control, to ensure that workers pay a fair price for food and energy. We can pay for such a programme by taking the wealth of the super rich and nationalising the banks and finance houses.

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