Lehman’s long shadow on the UK’s public finances

By Michael Burton | 11 September 2018
  • Michael Burton

Ten years ago this month the collapse of Lehman Brothers precipitated the worst recession since the 1930s. We are still living with its consequences a decade later, unlike previous slumps in the 1970s, 1980s and 1990s when there was a return to high growth within five years.

The obvious impact of this loss of economic growth has been on the public finances. The Institute for Fiscal studies this year estimated that had Labour Chancellor Alistair Darling’s GDP growth projections in March 2008 – six months before Lehman Brothers’ demise but after the fiscal crisis had begun – been met then GDP now would be 14% higher. By 2022 it would have been 20% higher.

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