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Why Is UK Economic Growth So Slow? Key Challenges & Solutions Explained!

2nd February 2025
The UK economy is facing sluggish growth, and economists are asking: Why?
In this video, we break down the key challenges holding back the UK's economic expansion, from slow productivity growth and rising economic inactivity to Brexit-related trade disruptions and infrastructure gaps. We’ll also analyze short-term factors like interest rate policies and the lingering cost-of-living crisis.
Why does slow growth matter? A weaker economy means lower tax revenues, pressure on public services, and stagnant wages. We’ll also look at government plans to revive growth—including housing reform, infrastructure investment, and policy shifts.
Whether you're an A-Level, IB, or GCSE Economics student, this video is packed with real-world insights to help you understand macroeconomic policies, fiscal policy, monetary policy, and supply-side reforms.
Glossary of Key Economic Terms
- Gross Domestic Product (GDP) – The total value of all goods and services produced within a country over a specific period, used as a measure of economic performance.
- Purchasing Power Parity (PPP) – A method of comparing economic productivity and standards of living between countries by adjusting for differences in price levels.
- Fiscal Policy – Government policies related to taxation, government spending, and borrowing, used to influence economic growth and stability.
- Monetary Policy – The process by which a central bank (e.g., the Bank of England) manages interest rates and money supply to control inflation, economic growth, and employment.
- Real GDP Growth – The increase in the value of goods and services produced by an economy, adjusted for inflation, over a given period.
- Trade Deficit – A situation where a country imports more goods and services than it exports, leading to a negative trade balance.
- Economic Inactivity – The proportion of the working-age population that is neither employed nor actively seeking employment.
- Cost-of-Living Crisis – A situation where households face rising prices for essential goods and services, leading to reduced disposable income and financial strain.
- Disposable Income – The amount of money individuals have available to spend or save after taxes and essential expenses have been deducted.
- Inflation – The rate at which the general level of prices for goods and services rises, eroding purchasing power.
- Interest Rates – The cost of borrowing money or the return on savings, typically set by a central bank to influence economic activity.
- Productivity – The measure of efficiency in producing goods and services, often calculated as output per worker or per hour worked.
- Foreign Direct Investment (FDI) – Investment made by a company or individual in one country into business interests in another country.
- Public Debt (National Debt) – The total amount of money that a government owes to creditors as a result of borrowing to cover budget deficits.
- Trade Barriers – Government-imposed restrictions on trade, such as tariffs, quotas, and regulations, that limit the free exchange of goods and services between countries.
- Supply-Side Policies – Government initiatives aimed at increasing productivity and economic efficiency, often through deregulation, tax incentives, and investment in infrastructure.
- Brexit-Related Trade Disruptions – Economic changes and challenges resulting from the UK’s departure from the European Union, including increased trade friction and reduced market access.
- Aging Population – A demographic trend where the proportion of elderly individuals in a population increases, potentially leading to greater government spending on healthcare and pensions.
- Housing Market Reform – Policies aimed at improving housing affordability and availability, often through new zoning laws, construction incentives, and mortgage regulations.
- Infrastructure Investment – Government spending on physical systems such as transportation, energy, and digital networks to support economic growth.
- Recession – A period of negative economic growth, typically defined as two consecutive quarters of declining GDP.
- Relative Poverty – A condition where individuals or families have significantly lower income than the average population, limiting their ability to afford basic necessities.
- Zoning Scheme – A government regulation that designates specific areas for residential, commercial, or industrial development.
- Tax Burden – The proportion of income or GDP that individuals and businesses must pay in taxes.
- Economic Confidence – The level of optimism or pessimism that businesses and consumers have about the economic future, influencing spending and investment decisions.
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