High taxes, over-regulation and risk aversion are strangling the UK economy, experts say

In the 1800s, the United Kingdom was clearly the richest country in the world, with consistent, solid economic growth, a focus on science and engineering, plus all the benefits of trade across the oceans. But now the country seems to have lost its mojo. The country’s living standards have fallen far behind those of other developed economies.

Contrary to popular perception, Britain’s GDP per capita (the income generated by the average person) has lagged behind that of the vast majority of the 50 United States plus Washington D.C., last year, according to forecasts in the third quarter of 2025 by the U.S. government, plus recent International Monetary Fund data. Projections are needed as the final annual GDP figures were not published at the time of writing.

When those states (plus Washington D.C.) compared their GDP per capita, the U.K. would have ranked 50th, behind Alabama, which is forecast to have a nominal per capita GDP of $60,265 in 2025. Britain was slightly worse off, at $60,010, according to the latest data from the U.S. government and the International Monetary Fund. Topping the list was Washington DC with $113,369. Analysts note that the figures don't include the cost of living; however, even with that accounted for, the U.K. still lags significantly behind the U.S. national average.

"If you leave aside Britain’s capital, London, their GDP per capita is much lower," Marc Chandler, chief market strategist at Bannockburn Global Forex in New York City, told FOX Business. London has a huge financial center which distorts some of the data. One of the major problems has been the lack of productivity growth, which measures the increase in output per average employee, Chandler, "U.S. productivity increases have been stronger." 

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On average, the U.S. GDP per capita is projected to be $89,599 in 2025, considerably higher than in Britain. The UK also lags Ireland, Switzerland, Singapore, Norway and Germany, to name a few countries, according to forecasts by the International Monetary Fund. "That’s what happens when you destroy innovation, taxes are too high, and regulations are too numerous," Robert E. Wright, an economic policy historian at the University of Austin, Texas, told FOX Business.

Wright notes there’s also a British cultural tendency toward risk aversion for many reasons. Even if a project or new business succeeds in the U.K., the company will be heavily taxed and then hampered by newly created regulations. "Not only are these barriers not helpful, but they’re also shooting themselves in the foot," he says. "And they aren’t at the technological frontier." American businesspeople tend to embrace risk. 

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According to surveys, the immediate future looks bleak, suggesting Britain’s economy will not suddenly power back, according to a research report from the analysis firm Oxford Economics. "The U.K. lacks a sustainable growth driver," the briefing states. That’s because what’s keeping the economy growing, albeit at an extra slow pace, is U.K. government spending, rather than organic growth and innovation from private-sector businesses.

Government spending has resulted in job creation and that has helped mute the headcount job losses in the private sector, according to the Oxford Economics report. "But the boost from the public sector will likely start to fade," it states. "Given weak private sector demand, we expect the jobless rate will rise further." 

The Oxford report also shows that since the second half of 2023, government jobs have been stubbornly better paid, on average, than those in the private sector. That’s likely to get in the way of encouraging creative entrepreneurs from innovating, experts say.

Oxford Economics forecasts a small 1% growth for 2026. But that was forecast before the U.S.-Israel war with Iran, which could lead to likely weaker growth for the U.K. analyst warned.

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Robert Jenrick, the shadow chancellor of the UK Reform Party, slammed the Labour government's handling of the economy. "We are losing our steel, our car manufacturing, our glass, our ceramics, our chemical industries," he told the U.K.’s Daily Express. "There are millions of good jobs that rely on these industries, and they simply will not survive if we continue to have energy prices that are five or six times higher than in the United States."