Why has Britain’s economic growth performance deteriorated compared with its peers since 2008? That’s the question Tyler Cowen, a prominent American economist from George Mason University, posed to his blog readers this week.

First, let’s remind ourselves of the stark reality. Between 1980 and 2007, the UK’s annual GDP per capita growth averaged 2.4 per cent, eclipsing Germany, France, the Netherlands and Sweden. From 2008 to 2022, we were then a north European laggard, with growth of just 0.6 per cent a year — surpassing only France (barely).

This drastic decline in growth has severely impacted British living standards. If we had maintained our pre-crisis trend, GDP per capita would have been 28 per cent higher than it was by 2022. That’s unrealistic given the slowdown observed across these countries, but even matching Germany’s 0.9 per cent annual growth after 2008 would have left us 4 per cent richer.

Cowen estimates that 50 per cent of our relative economic decline stems from an overreliance on sectors such as financial and business services, which performed poorly after the 2008 crash. He chalks up another 20 per cent to Brexit, 15 per cent to “not in my back yard” (nimby) policies, 10 per cent to flawed energy policies, and 5 per cent to general decrepitude in parts of the country.

And there’s no doubt, on Cowen’s specific query, the financial crisis looks the obvious culprit. By 2010 and 2011, a pronounced growth gap with Germany was already evident, predating “austerity”, the Brexit referendum and the pandemic. Our financial sector’s implosion did more than erode a pillar of GDP growth — it also drained tax revenues and disrupted capital allocation to innovative sectors.

Yet, from a policy perspective, identifying what changed after 2008 is less interesting than what could have been done better. Cowen’s question was ignited by a British entrepreneur telling him that the UK’s planning laws explain much of the enduring prosperity gap to the United States. I agree, and think that Cowen understates the damage of nimbyism after 2008. The financial crisis headwinds made it more imperative to dismantle growth-stifling land-use barriers, which are becoming increasingly damaging with time.

Careful analysis by the LSE economists John Van Reenen and Xuyi Yang suggests the UK has a sharper deterioration in productivity growth than France or Germany because of weaker capital investment, which the financial crisis, Brexit and political uncertainty have exacerbated. We can’t undo the financial crisis or easily overturn the public’s decision on Brexit, but giving the green light to more housing, energy and infrastructure projects by liberalising land use was an obvious path to countering this investment collapse.

Instead, nimbycentric land use policies have tightened. As our population swelled by six million people after 2008, fixed constraints like green belts have effectively become more constrictive, blocking housing and infrastructure development that could have channelled new arrivals and British workers into productive cities like London, Cambridge and Oxford.

Prior to 2008, pharmaceuticals, chemicals, and life sciences were expanding strongly, but are increasingly hampered by land rationing and escalating rental costs, too. Savills estimated in 2020, for example, that London had 90,000 sq ft and Manchester 360,000 sq ft of suitable lab space available, compared with Boston’s 14.6 million sq ft and New York’s 1.36 million sq ft. Similar problems afflict efforts to build hyperscale data centres.

Then there’s government decarbonisation and “levelling up” efforts. Without land-use frameworks allowing new energy or transport infrastructure to be built cheaply, Britain has both stifled capital investment and crystallised rising costs for businesses. Industrial electricity prices, for example, doubled relative to inflation from 2004 to 2021, but Britain spent much of that period banning new offshore wind capacity and fracking, while prevaricating on other energy infrastructure decisions.

While Cowen is correct that unchanged land use policies can’t alone explain a sudden growth crash after 2008, failing to reform nimby laws certainly surrendered our best chance to keep pace with other countries.