Britain is in the grip of a deepening malaise. Over the past few months and years, a growing and unsettling consensus has emerged: the country is broken. What is less clear is what could be the route towards repair.
Two interconnected crises lie at the heart of the discontent. First is a fraying of what could broadly be termed the social fabric, which leads citizens towards having some trust in each other, and more generally in the state itself. In the Daily Mail, Andrew Neil warns that “Britain is on the edge of disaster… I’m scared for what’s to come.” A recent Economist poll found that seven in 10 Brits believe race riots in the near future are likely.
This apprehension is easy to understand. Over the past few weeks protests erupted in Epping, Essex and near Canary Wharf in London, where locals rallied against the government’s decision to house young male asylum seekers in local hotels. Demands to “send them home” and “save our kids” soon proliferated online, drawing in agitators from both left and right. These social tensions, particularly over illegal immigration, have become national flashpoints.
Meanwhile, Britain’s politics is rapidly fracturing along both ethnic and ideological lines. Jeremy Corbyn recently launched a (yet unnamed) new left-wing party with former Labour MP Zarah Sultana that is likely to draw votes not just from the left but also from those who are furious about Prime Minister Sir Keir Starmer’s accommodating stance on Israel. This will further fragment the centre. And Nigel Farage, whose extreme right wing Reform UK party has been leading in the polls for months, has warned that “civil disobedience on a vast scale” will break out unless migrants stop arriving in the UK from across the Channel in small boats.
Why are the British in such a state of angst? And, more importantly, are they right to be so worried?
Much of the anger can be traced to a second, more fundamental issue: the failure of the British economy. Business confidence has cratered. A July survey by business lobby The Institute of Directors (IoD) found that more than 80% of British executives were pessimistic about the economy; a gloom deeper than that felt even after Brexit, the Covid-19 pandemic, or Liz Truss’ catastrophic mini-budget that almost bankrupted the country. The institute’s economic confidence index has plunged to a record low of -72.
What went wrong?
But what has gone wrong? Essentially, Britain’s economy is no longer able to deliver rising living standards, reasonable costs of living or acceptable levels of public services. The state has little fiscal room to ease budgetary trade-offs, while politicians have been either unable or unwilling to confront the difficult choices they entail, be they on welfare, taxation, spending or structural reform. Starmer’s caution on welfare reform during the 2024 general election campaign is symptomatic of this broader political paralysis.
Economic data underscores the scale of the problem. According to the 2025 Living Standards Review from the National Institute of Economic and Social Research, real disposable income per capita rose by a paltry 14% between 2007 and 2024, compared with 48% in the halcyon days between 1990 and 2007. Given the collapse in economic fortunes of Britons, it is no surprise disillusionment is rife.
The International Monetary Fund similarly reports that annual trend growth in GDP per capita has declined from 2.5% between 1990 and 2007 to just 0.7% from 2008 to 2025, which is the steepest drop among the G7 plus Spain. Had pre-2008 trends continued, the UK’s GDP per capita in 2025 would be a full 33% higher than it is now, representing the largest shortfall in this group.
This drop is fundamentally a result of stagnant productivity. Between 2007 and 2023, output per hour in the UK rose by just 6%, among peers outperforming only Italy. In contrast, the US posted a 22% increase, while the Eurozone averaged 10% (an important consideration given the reality of Brexit).
The UK’s torpid productivity is of grave socioeconomic concern. When economies cease to grow, everything becomes zero-sum; more for one group of people means less for others. The problem is exacerbated if demographic change increases the number of older beneficiaries of fiscal transfers relative to that of younger, productive taxpayers. The overwhelming questions in politics become less about growing the pie, but rather a race to contain collective frustration.
Arresting this decline first requires being honest about past failures. There needs to be an acknowledgement that the economic model born of the Thatcher neoliberal revolution has not delivered long-term gains. Much of the post-1980s performance was a mirage created by a global credit boom to which the UK was more exposed than any other developed economy. The act of economic suicide that was Brexit has not helped either. The Centre for European Reform estimates that by mid-2022, the UK’s GDP was 5.5% lower than it would have been had it remained in the EU.
Structural weaknesses
These structural weaknesses have become apparent by the increasingly precarious state of public finances. The Office for Budget Responsibility has flagged the UK’s perilous position; the country now has the sixth-highest debt, fifth-highest deficit and third-highest borrowing costs among developed economies. June 2025 saw the second-highest government borrowing on record, surpassed only by June 2020 at the height of the Covid-19 pandemic.
Bond markets have traditionally given more leeway to Britain because of its reputation for seriousness, political stability and fiscal prudence. But Liz Truss’ disastrous spell as PM seems to have blown that premium for good, while Starmer’s Labour looks more like a teetering administration on its last legs than a barely one year old government with a huge majority in the House of Commons. Nigel Farage looks on eagerly from the wings.
Last month, the government failed to pass modest welfare reforms that would have raised a measly £6.5-billion (R156-billion), a fraction of the £1.3-trillion (R31-trillion) annual public spend. Embattled Chancellor of the Exchequer Rachel Reeves has instead raised taxes on labour and targeted non-domiciled residents, risking the flight of high earners who contribute disproportionately to both tax revenues and general economic activity, particularly in the all-important regional powerhouse of London.
While an outright crisis — whether a debt blow out or social unrest — is still on balance unlikely, the long-term trajectory looks bleak. The UK faces challenges not unlike those confronting other post-industrial democracies. But without access to the EU single market, burdened with a dysfunctional political class and bound by stagnant economic productivity, Britain appears locked in a slow and grinding descent.
The post-1980s era of growth is over. What lies ahead for Britain may not necessarily be an immediate crisis, but it is likely to be a drawn-out period of socioeconomic pain and inexorable decline. DM