Given all the brow-beating about how reliant Britain is on consumer spending, the following chart is worth reflecting on. It shows that while the share of UK GDP accounted for by household consumption has risen steadily since the war, it is still far lower today than for most of the past couple of centuries.
As you can see, investment and government account for far bigger shares of domestic growth (I’ve stripped net exports out of the graph above) now than they did for most of the Victorian era. In a sense, this goes without saying. The private sector was far bigger during that period. And ultimately if people are employed in the private sector, the money they are paid eventually goes into household spending.
All the same, it’s an interesting long-run chart. I put it together in the course of writing my column for today’s Times (you can find it here – it’s about the City, the pound, Dutch disease and why manufacturing has a problem). The numbers are from the brilliant Bank of England “Three Centuries of Data” spreadsheet (which I find myself going back to on an almost daily basis these days).
Where else could you find a measure of the size of budget deficits going back a couple of centuries? For those who are curious, the biggest one I found was 48% of GDP in 1916. Makes the 11% recorded in 2009 look positively parsimonious.