UK economic policy trapped in fairytale thinking, FT warns

Britain’s economic policymakers are clinging to comfortable myths that bear little resemblance to fiscal reality, the Financial Times has argued in a stinging assessment that lands at a particularly awkward moment for the government. The paper’s central charge is blunt: fairytale economics — the belief that growth can be conjured without serious structural reform — is actively holding the UK back from the sustained recovery it desperately needs.

The myths policymakers refuse to abandon

The FT’s critique targets a cluster of assumptions that have shaped British economic thinking for decades. Chief among them is the notion that supply-side bottlenecks will resolve themselves, that productivity will eventually catch up with peer economies on its own, and that fiscal restraint alone constitutes a credible growth strategy. None of that has materialised. UK productivity growth has averaged just 0.4% annually since 2008, compared with roughly 1.1% in comparable OECD economies. That gap compounds year after year. And yet the policy response has remained remarkably unchanged.

“We keep reaching for solutions that feel reassuring rather than solutions that might actually work,” said one senior Treasury adviser, speaking on background. “It’s a political comfort blanket at this point.”

A decade of stagnation dressed up as strategy

The numbers are stubborn. Real wages in the UK are barely higher than they were in 2007. Business investment as a share of GDP sits around 10%, well below Germany’s 12.5% and France’s 14%. Meanwhile, successive governments have announced ambitious industrial strategies, levelling-up agendas and growth missions — documents that generate headlines and then quietly gather dust. So the cycle repeats. A new policy paper lands. Economists respond cautiously. Implementation lags badly. Targets get revised or quietly dropped.

It’s not incompetence, exactly. It’s something more systemic.

What genuine reform would require

Critics, including several economists cited by the FT, argue that real progress demands uncomfortable decisions: planning reform substantial enough to actually accelerate housebuilding, not just tinker at the edges; public investment commitments that extend beyond a single parliamentary cycle; and a skills agenda tied directly to labour market gaps rather than political optics. The UK currently spends around 1.7% of GDP on public investment infrastructure, trailing France at 2.3% and the US post-Inflation Reduction Act at closer to 2.8%. Those aren’t small differences. They accumulate into structural disadvantage.

Whether anything changes this time

The government insists it recognises the challenge. A spokesperson for the Treasury pointed to the recently announced ten-year infrastructure strategy and commitments to planning liberalisation as evidence of a serious break from past practice. But economists who’ve watched similar announcements dissolve before are cautious. The UK’s growth problem isn’t a mystery. It’s a political will problem, and the diagnosis has been sitting on the table for years. Whether this time produces different results — rather than a better-written fairy tale — is the question that actually matters.