ICAEW chart of the week: Exploding debt

My chart for ICAEW this week takes a look at how UK public debt has exploded since the financial crisis to more than quintuple from £0.6trn in March 2008 to a projected £3.1trn in March 2029.

Exploding debt

Step chart showing how UK public sector net has changed between March 2008 and the projected position in March 2029.

[debt bars shaded orange, changes shaded in purple]

March 2008: £0.6trn
Financial crisis: +£0.7trn
March 2012: £1.3trn
Austerity years: +£0.5trn
March 2020: £1.8trn
Pandemic / energy crisis: +£0.9trn
March 2024: £2.7trn

[bar colours shaded by 50% to indicate the following are projected numbers]

Latest plan: +£0.4trn
March 2029:  £3.1trn

30 Nov 2023.
Chart by Martin Wheatcroft FCA. Design by Sunday.
Source: OBR, 'Public finances databank - Nov 2023'.

As illustrated by our chart this week, the sums borrowed by the government since the financial crisis of a decade and half ago have been truly astonishing. 

In March 2008, the official measure of net debt for the UK public sector was less than £0.6trn. During the financial crisis, government borrowing totalled £0.7trn over a four-year period, causing public sector net debt to more than double to £1.3bn in March 2012. 

The eight austerity years saw government cut spending on public services to a significant degree but still borrow a further £0.5trn to see net debt reach £1.8trn in March 2020 – arguably not mending the roof while the sun was shining. This was then followed by an exceptional amount of borrowing during four years of pandemic and energy crisis (including the current financial year) that is expected to see net debt increase by a total of £0.9trn to reach £2.7trn in March 2024.

The Autumn Statement 2023 on Wednesday 22 November saw the Chancellor set out his latest plan for the UK public finances over the next five financial years. This includes a further £0.4trn of borrowing, with public sector net debt projected to amount to £3.1trn in March 2029 – more than quintuple the net amount owed by the UK state 21 years earlier in March 2008.

This assumes that the government can stick to its borrowing plans – many commentators have suggested that planned cuts in spending on public services are unrealistic, meaning more borrowing if taxes are not to rise.

The £2.5trn increase in debt between 2008 and 2029 comprises £2.2trn in borrowing to fund 21 years of deficits (the annual shortfall between receipts and spending) and £0.3trn in other borrowing to fund government lending (such as student loans) and working capital requirements.

As a share of the economy, the increase is less dramatic but still significant – rising from a net debt to GDP ratio of 35.6% in March 2008, to 74.3% in March 2012, to 85.2% in March 2020, to an anticipated 97.9% in March 2024. However, the good news is that net debt / GDP is expected to fall to 94.1% in March 2029 as inflation and economic growth offset the additional borrowing.

The worry for this (or any alternative) government is that while borrowing levels in the OBR’s forecast spreadsheet for the next five years appear manageable and are (just) within the current fiscal rules, the numbers assume that we don’t enter another recession or other economic crisis in that time. Otherwise, we could see debt exploding again.

This chart was originally published by ICAEW.

ICAEW chart of the week: Autumn Statement 2023

My chart for ICAEW this week illustrates how Chancellor Jeremy Hunt used almost all of the available upside from inflation and fiscal drag to fund his tax measures and a series of business growth initiatives.

Autumn Statement 2023

Step chart (waterfall diagram) showing the average change to 2023/24 to 2027/28 forecasts since the Spring Budget 2023.

Forecast revisions (steps in orange):

Inflation +$41bn
Fiscal drag +£7bn
Other changes +£4bn
Debt interest -£21bn
Welfare uprating -£13bn

= Forecast revisions +£18bn (subtotal in purple)

Policy measures (steps in blue):

Tax measures -£11bn
Spending and other -£6bn

= Net changes +£1bn (total in purple)

23 Nov 2023.
Chart by Martin Wheatcroft FCA. Design by Sunday.
Sources: HM Treasury, 'Autumn Statement 2023'; OBR, 'Economic and fiscal outlook, Nov 2023'.

The Autumn Statement 2023 on Wednesday 22 November featured a surprise tax cut to national insurance and a perhaps less surprising decision to make full expensing of business capital expenditure permanent.

As my chart illustrates, the forecasts for the deficit over the next five years benefited by £41bn a year on average in higher receipts from inflation, £7bn a year on average in additional ‘fiscal drag’ as higher inflation erodes the value of frozen tax allowances more quickly, and a net £4bn in other upward forecast revisions. These improvements to the forecasts were offset by an average of £21bn a year in higher debt interest and £13bn from the expected inflation-driven uprating of the state pension and welfare benefits, to arrive at a net improvement of £18bn a year on average over the five financial years from 2023/24 to 2027/28 before policy decisions.

In theory, these upward forecast revisions should be absorbed by more spending on public services as higher inflation feeds through into salaries and procurement costs. However, the Chancellor has chosen to (in effect) sharply cut public spending and use almost all of the upward revisions to fund tax measures and business growth initiatives instead. These amounted to £11bn a year on average in tax changes and £6bn a year on average in spending increases and other changes to reduce the net impact to just £1bn a year on average over the five-year period.

The resulting net change of £1bn on average in forecasts for the deficit is to reduce the forecast deficit by £8bn for the current year (from £132bn to £124bn) and by £1bn for 2024/25 (to £85bn), with no net change in 2025/26 (at £77bn), an increase of £5bn in 2027/28 (to £68bn), and no net change for 2027/28 (at £49bn).

The main tax changes announced were the cuts in national insurance for employees by 2 percentage points from 12% to 10% and by 1 percentage point for the self-employed from 9% to 8%, reducing tax receipts by an average of £9bn over five years. This is combined with the effect of making full expensing permanent of £4bn – this change mainly affects the later years of the forecast (£11bn in 2027/28), although ironically the average is a better proxy for the long-term cost of this change, which the OBR estimates is around £3bn a year. 

Other tax changes offset this to a small extent. 

Spending and other changes of £6bn a year on average comprise incremental spending of £7bn a year plus £2bn higher debt interest to fund that spending, less £3bn in positive economic effects from that spending and from the tax measures above.

Although the cumulative fiscal deficit over five years has been revised down by £4bn, the OBR has revised its forecast for public sector net debt as of 31 March 2028 up by £94bn from to £3,004bn. This principally reflects changes in the planned profile of quantitative tightening and higher lending to students and businesses.

The big gamble the Chancellor appears to be making by choosing to opt for tax cuts now is that the OBR and Bank of England’s pessimistic forecasts for the economy are not realised – enabling him to find extra money in future fiscal events to cover the effect of inflation on public service spending. Otherwise, while it may be possible to cut public spending by as much as the Autumn Statement suggests, it is difficult to see how he can do so without a further deterioration in the quality of public services given he is not providing any additional investment in technology, people and process transformation to deliver sustainable efficiency gains.

This chart was originally published by ICAEW.

ICAEW chart of the week: Pensioners dilemma

The ‘elephant in the room’ of growing numbers of pensioners and what that will mean for the long-term prospects of the public finances is likely to be avoided yet again at next week’s Autumn Statement.

Pensioners dilemma

Two column chart with lines between them showing projected changes in the UK population between 2023 and 2043.

2023: 68.1m (left hand column) Change: +4.0m (+6%)
2043: 72.1m (right hand column)

Split into two bars in each column.

Pensioners (in purple)

2023: 12.4m
Change: +3.3m (+27%)
2043: 15.7m

Everyone else

2023: 56.7m
Change +0.7m (+1%)
2043: 56.4m

My chart for ICAEW this week is on the ‘elephant in the room’ that haunts fiscal events such as next week’s Autumn Statement – the rapidly rising number of pensioners that is driving some of the biggest line items in the national budget: pensions, health and social care.

This fiscal event is unlikely to be any different, with the Chancellor expected to focus most of his statement on short-term measures to free up headroom for pre-election tax cuts at a time of stagnant economic growth.

Any substantive discussion on the long-term prospects for the public finances is likely to be absent beyond a continued commitment to seeing the debt to GDP ratio start to fall within the next five years. How he – or more likely his successors – might be able to avoid having to raise taxes significantly in the coming decades to pay for the cost of pensions, health and social care for many more people, living longer, sometimes less healthy lives, is unlikely to be at the core of what is announced.

To illustrate the dilemma facing policymakers and the public, our chart shows how pensioners represent 3.3m out of the 4.0m projected increase in the size of the UK population between 2023 and 2043. The total population of the UK is projected to increase by 6% from 68.1m in 2023 to 72.1m in 2043, with the number of pensioners expected to increase by 27% from 12.4m this year to 15.7m in 20 years’ time. 

The number of non-pensioners is expected to increase by 0.7m or 1% from 55.7m to 56.4m, with net inward migration of 5.0m over that period offsetting what would otherwise be a significant fall in the numbers below retirement age. (Not shown in the chart is a projected 3% rise in the working age population and a 7% fall in the number of children.)

The projected 27% rise in the number of pensioners is despite a planned increase in the state pension age from age 66 to age 67 in 2027, one of the few long-term steps the government has taken to mitigate the fiscal effects of rising pensioner numbers. However, increasing the retirement age doesn’t directly impact health and social care costs, as well as being partly offset by the cost of supporting increasing numbers of people out of work between traditional retirement age and the age at which they can take their state pension.

Given the significance of the demographic challenge to the public finances, there is very little public debate on what to do, especially as the current policy of cutting the proportion of spending going on public services outside of health appears increasingly unsustainable. 

Spending on defence and security (the traditional budget to raid) is already close to the NATO minimum and appears likely to need to increase given the global security situation, while extracting further savings from other public services seems extremely unlikely, especially given the reluctance of successive governments to put in the level of upfront and ongoing capital investment that might make operational savings possible.

The irony is that, unlike the game-theory scenario of the prisoners’ dilemma that makes optimal decision-making difficult for two prisoners who can’t communicate with each other, there is no theoretical restriction on the ability of policymakers to talk to the public about the pensioners dilemma and to have a proper debate about that might mean for taxes and public services in the long term.

Read moreICAEW Autumn Statement 2023 hub.

This chart was originally published by ICAEW.

ICAEW chart of the week: Coronavirus

My chart this week looks at one of the big questions being looked at by the UK COVID-19 Inquiry: why did the UK experience one of the highest death rates in the developed world?


Column chart showing deaths per million population, with each column broken into 2020, 2021, 2022 and 2023 (to 2 Nov) components.

Year components only labelled for the UK 

Japan - 603 (28 in 2020, 120 in 2021, 316 in 2022, 139 in 2023 up to 2 Nov) 
Australia - 893 (35, 58, 587, 212)
Canada - 1,395 (397, 382, 498, 118)
Ireland - 1,848 (451, 761, 480, 156)
Germany - 2,099 (564, 848, 576, 111)
France - 2,599 (983, 938, 580, 98)
Italy - 3,259 (1,247, 1,078, 805, 129)
USA - 3,365 (1,041, 1,381, 786, 157)
UK - 3,421 (1,382, 1237, 583, 219)
Greece - 3,635 (451, 1,524, 1,393, 267)

9 Nov 2023.
Chart by Martin Wheatcroft FCA. Design by Sunday.

Source: Our World In Data, ‘COVID-19 data explorer’ / WHO, ‘Covid-19 dashboard’.

My chart for ICAEW this week is on the coronavirus pandemic and how, according to World Health Organisation (WHO) data as summarised by Our World in Data’s Covid-19 Data Explorer, the UK suffered one of the highest death rates in the developed world.

According to the official statistics, there were 3,421 deaths per million population attributed to COVID-19 in the UK between 1 January 2020 and 2 November 2023. This compares with 603 deaths per million in Japan, 893 in Australia, 1,395 in Canada, 1,848 in Ireland, 2,099 in Germany, 2,599 in France, 3,259 in Italy, 3,365 in the US and 3,635 in Greece.

Not shown in the chart are the total number of cumulative deaths attributed to COVID-19 (ie before dividing by the population) of 74,694 in Japan, 23,289 in Australia, 53,297 in Canada, 9,281 in Ireland, 174,979 in Germany, 167,985 in France, 192,406 in Italy, 1.14m in the USA, 230,974 in the UK, and 37,738 in Greece.

Both Our World In Data and the WHO give warnings about the data, especially given difficulties in identifying which deaths were caused by the coronavirus (especially in 2020 before testing was widely available), whether deaths are recorded when they happened or when they were reported, and differences in how countries attribute deaths to causes. 

Despite those factors, these statistics give an overall impression of how badly the coronavirus affected different countries, especially when combined with other data, such as excess mortality (also not shown in the chart). According to Our World In Data, the cumulative difference between total deaths reported from all causes and projected deaths (based on an extrapolation from the years prior to the pandemic) changes the rankings for the countries in our chart, improving the UK’s position to an extent with the US has more excess deaths proportionately than the UK, and Italy more than Greece. Australia has the lowest level of excess deaths for these countries, below Japan, while France is between Canada and Ireland.

The chart also illustrates the deaths per million of population by year, highlighting how for the UK this was 1,382 in 2020, 1,237 in 2021, 583 in 2022, and 219 in 2023, up to 2 November 2023.

The UK COVID-19 Inquiry is looking at much more than the number of deaths as it considers how coronavirus affected all of us over the past few years, how people were affected, including short- and long-term impacts on health and how people died, as well as the impact on the economy and our lives more generally of COVID-19 – and the UK Government’s response to it.

This chart was originally published by ICAEW.

ICAEW chart of the week: Criminal justice

My chart this week looks at how the criminal justice system in England and Wales is performing by examining how long cases are taking to make their way through the Crown Courts to completion.

Criminal justice

Line chart showing median time in days between offence and completion

210 days in 2014 Q1
rising and falling to 248 in 2015 Q2 242 in 2016 Q1
260 in 2016 Q2 and Q3
230 in 2017 Q4
245 in 2018 Q2
230 in 2018 Q3
254 in 2020 Q1

falling to 211 in 2020 Q2
rising sharply to 438 in 2021 Q3

falling to 351 in 2022 Q3
rising to 398 in 2023 Q1
falling slightly to 387 in 2023 Q2

2 Nov 2023.
Chart by Martin Wheatcroft FCA. Design by Sunday.
Source: Ministry of Justice, 'England and Wales criminal court statistics: Apr to Jun 2023'.

My chart this week is inspired by the Institute for Government (IfG) and CIPFA Performance Tracker 2023 published on 31 October 2023. Concluding that “government is stuck in a public service doom loop”, IfG and CIPFA together analyse how the performance of key public services has deteriorated in recent years, and not just because of the pandemic.

The chart (an expanded version of Figure 0.1 in the Performance Tracker) is based on the median time between an offence being committed and completion (conviction, acquittal or dismissal) in Crown Courts in England and Wales, according to Ministry of Justice statistics for the criminal justice system up to June 2023. 

This is a key metric in understanding how efficient the police, prosecutors and courts together are in bringing criminals to justice, as well as an indicator of just how long the lives of victims, their families, witnesses and defendants are being put on hold while cases work their way through the system.

Back in the first quarter of 2014, the median time from offence to completion was 210 days (6.9 months). This trended up to reach 248 days (8.2 months) in 2015 Q2, before hovering around that level in the years before the pandemic, with our chart highlighting how it fell to 242 in 2016 Q1, rose to 260 in 2016 Q2 and Q3, fell to 230 in 2017 Q4, rose to 245 in 2018 Q2, back to 230 the following quarter, before rising to 254 days (8.4 months) in the first quarter of 2020 at the start of the pandemic. 

The median fell to 211 days in 2020 Q2 as more complex cases were deferred during the first lockdown, increasing sharply to reach a peak of 438 days (14.4 months) by the third quarter of 2021. The time taken improved to 351 days (11.5 months) by the third quarter of 2022 as the courts started to clear the backlog, but then increased to 398 days (13.1 months) in the first quarter of 2023. The most recent data is for the second quarter, with a median average time taken of 387 (12.7 months) for cases completing in that quarter.

While there are inevitably going to be a number of complex criminal cases that are going to take a long time to be investigated and then come to trial, for the median average case to be taking more than a year to complete its journey through the justice system in England and Wales is not a good sign.

Read more:

This chart was originally published by ICAEW.

ICAEW chart of the week: US federal government deficit 2023

My chart this week looks at the federal deficit of $1.7trn reported by the US government for its recently completed financial year ended 30 September 2023.

Column chart split into three vertical sections: receipts, outlays and deficit. 

Actuals for the five years to the year ended September 2023, then budget for Y/E Sep 2024.

Y/E Sep 2019: $3.5trn receipts - $4.5trn outlays = -$1.0trn deficit
Y/E Sep 2020: $3.4trn - $6.5trn = -$3.1trn
Y/E Sep 2021: $4.0trn - $6.8trn = -$2.8trn
Y/E Sep 2022: $4.9trn - $6.3trn = -$1.4trn
Y/E Sep 2023: $4.4trn - $6.1trn = -$1.7trn
Y/E Sep 2024 (Budget): $5.0trn - $6.9trn = -$1.9trn

26 Oct 2023.   Chart by Martin Wheatcroft FCA. Design by Sunday.

Sources: US Department of the Treasury; US Office of Budget and Management.

The US Department of Treasury published on 20 October 2023 its final monthly treasury statement for the US government’s financial year ended 30 September 2023 (FY2023), enabling our chart this week to look at the actual numbers over the past five years and the budget for the new financial year that started on 1 October.

Our chart illustrates how the deficit increased significantly from the $1.0trn reported for FY2019 ($3.5trn receipts less $4.5trn outlays) to $3.1trn in FY2020 ($3.4trn-6.5trn) and $2.8trn in FY2021 ($4.0trn-$6.8trn) at the height of the pandemic, before falling to $1.4trn in FY2022 ($4.9trn-$6.3trn) as the US economy recovered. The deficit by $0.3trn increased to $1.7trn in FY2023 ($4.4trn-$6.1trn) and is budgeted to increase by a further $0.2trn to $1.9trn in FY2024 ($5.0trn forecast receipts-$6.9trn forecast outlays).

Not shown in the chart is the excess of financial liabilities over financial assets, which increased by $1.7trn from $22.3trn on 30 September 2022 to $24.0trn on 30 September 2023. This differs from ‘debt held by the public’ (the headline measure of federal debt), which increased by $2.0trn from $24.3trn to $26.3trn, more than the federal deficit because of movements in other financial assets and liabilities.

Receipts in FY2023 of $4,439bn comprised $2,176bn in individual income taxes, £1,614bn in social security and retirement contributions, $420bn in corporation income taxes, $80bn in customs duties, $76bn in excise taxes, £34bn in estate and gift taxes and $39bn in other receipts. Outlays for same period of $6,134bn comprised $1,737bn on health and Medicare, $1,354bn on social security, $821bn on defence, $774bn in welfare benefits, $659bn in interest, $302bn for veteran services and benefits, $127bn on transportation, $100bn on commerce, and $260bn on other outlays. 

The latter includes the administration of justice, agriculture, community and regional development, education, training, employment and social services, energy, general government, general science, space and technology, international affairs, natural resources and environment, and undistributed offsetting receipts.

These amounts are different from the accruals-based US GAAP federal government financial statements for FY2023 that are expected to be published next April, which will show a much larger accounting loss than the federal deficit reported here. For example, the FY2022 net operating cost (ie accounting loss) of $4.2trn was $2.8trn higher than the federal deficit of $1.4trn for last year, of which the largest difference of $2.6trn related to accruals for federal employee and veteran benefits.

These amounts appear astronomical, especially to those of us living in smaller (and unfortunately) less prosperous countries than the 335m people who live in the US, with its estimated GDP of $26.3trn in FY2023 – equivalent to around $6,600 per person per month.

Federal receipts and outlays in FY2023 represented 17% and 23% of GDP respectively or on a per capita basis were approximately $1,105 and $1,525 per person per month. The federal deficit was therefore equivalent to 6% of GDP or $420 per person per month. 

The excess of financial liabilities over financial assets and debt held by the public were 91% and 100% of GDP respectively, equivalent to an amount owed of around $71,500 or $78,500 per person, depending on which measure is used.

This chart was originally published by ICAEW.

ICAEW chart of the week: Inflation by month

My chart this week looks at how September’s inflation rate of 6.7% is made up by month, and why a big drop in the annual rate is predicted next month.

Inflation by month

Step chart showing monthly inflation from October 2022 to September 2022 adding up to annual inflation of +6.7% for the year to September 2023.

Oct 2022 +2.0%
Nov 2022 +0.4%
Dec 2022 +0.4%
Jan 2023 -0.6%
Feb 2023 +1.1%
Mar 2023 +0.8%
Apr 2022 +1.2%
May 2023 +0.7%
Jun 2023 +0.1%
Jul 2023 -0.4%
Aug 2023 +0.3%
Sep 2023 +0.5%

Year to Sep 2023 +6.7%

19 Oct 2023.
Chart by Marin Wheatcroft FCA. Design by Sunday.
Source: ONS, 'Consumer price inflation, UK: September 2023'.

The Office for National Statistics (ONS) reported on 18 October 2023 that the annual rate of consumer price inflation (CPI) for the year to September 2023 was 6.7%.

Our chart this week illustrates how this is made up of monthly inflation rates from October 2022 through September 2023 of +2.0%, +0.4%, +0.4%, -0.6%, +1.1%, +0.8%, +1.2%, +0.7%, +0.1%, -0.4%, +0.3% and +0.5% respectively.

As well as highlighting how the monthly inflation rate can bounce around from month to month, including a couple of times where prices went down, it shows how a big jump in the consumer prices index of +2.0% in October 2022 is a significant component in the annual rate reported for the year to September 2023.

This provides an insight into what is likely to happen to inflation when it is reported next month. Instead of a large rise in domestic energy prices (a 17% increase in the cost of electricity and a 37% increase in the cost of domestic gas between September and October 2022 according to the ONS) that drove the +2.0% reported a year ago, the expectation is that energy prices will drop between September and October 2023 following Ofgem’s decision to reduce the energy price cap by 7% for the current quarter.

When the +2.0% monthly increase from October 2022 drops out of the index to be replaced by a much smaller monthly increase for October 2023 (or even potentially a monthly decrease), the annual rate of inflation should reduce significantly – potentially to as low as the 5.3% ‘halved’ rate of inflation aspired to by the Prime Minister.

For a broader insight into the UK economy, read ICAEW’s economic update October 2023: where next for interest rates?

This chart was originally published by ICAEW.

ICAEW chart of the week: Greenhouse gas emissions

My chart this week looks at how greenhouse gas emissions increased again in 2022 after a big dip during the pandemic. Was that just a blip or will the downward trend resume?

Greenhouse gas emissions

Line chart showing million tonnes of CO2-equivalent emissions between 1990 and 2022.

The line starts at 843m tCO2e in 1990, rises to 853m tCO2e in 1991 and then gradually falls with a few upward blips until reaching 489m tCO2e in 2020 and then rising to 513m tCO2e in 2022.

12 Oct 2023.
Chart by Martin Wheatcroft. Design by Sunday.
Source: ONS, 'Greenhouse gas emissions: provisional estimates 2022'.

The Office for National Statistics (ONS) recently reported provisional numbers for greenhouse gas emissions in 2022, reporting that UK residents and UK-resident businesses emitted a total of 513m tonnes of carbon dioxide equivalents (tCO2e).

Our chart this week shows the overall trend since 1990 according to the ONS. Emissions were 843m tCO2e in 1990, rising to 853m tCO2e in 1991, from which point they have declined in most years since then apart from the odd upward blip.

The 513m tCO2e provisionally estimated to have been emitted in 2022 is up 2% over 2021 and just under 5% higher than the 489m tCO2e emitted during 2020, the first year of the pandemic when much of the country was locked down.

The good news is that this is still 7% lower than the 551m tCO2e emitted during 2019.

This disruption to the downward trend is primarily due to the pandemic, which saw emissions drop by a massive 11% in 2020 compared with 2019, before rising by 3% in 2021 and 2% in 2022.

The hope is that the downward trend will resume in 2023 and 2024 as decarbonisation efforts continue.

Most of the fall in emissions since 1991 has been delivered by the shift from coal to gas and renewable sources in electricity generation, combined with greater energy efficiency in appliances and equipment – what many commentators call “the easy bit”. The next stages of decarbonisation will be much harder as it involves switching everyone from fossil-fuel-powered vehicles to electric, completing the shift to renewable electricity generation, decarbonising most industrial processes and radically changing how we heat our homes and offices.

This chart was originally published by ICAEW.

ICAEW chart of the week: UK births and deaths

My chart this week looks at how deaths in the UK are expected to exceed births within just a couple of years – a major change in our demographic story.

UK births and deaths

Line chart showing projected births and deaths for years to June 2024 through to June 2044.

Births: 667,000 in the year to June 2024, falling slightly to 662,000 in the year to June 2031, before gradually rising to 718,000 in the year to June 2044. 

Deaths: 650,000 in the year to June 2024 rising to cross with the line for births in 2026 and continue to rise to 797,000 in the year to June 2044.

Source: ONS, '2020-based interim projections (June 2022) - UK births and deaths in the year to June'.

The big drivers of population change in the UK (and in many other developed countries) have been a declining birth rate and more people living longer, resulting in a growing population even before taking account of net inward migration.

However, that growth is starting to slow as the birth rate has declined as a proportion of the overall population – absent migration, it is expected to start to go into reverse as the death rate rises, driven by the bulge in the population constituted by the ‘baby boomer’ generation reaching their 60s and 70s.

As illustrated by my chart this week, the number of births is expected to fall slightly over the next few years (from 667,000 in the year to June 2024 and 668,000 in the year to June 2024 to 662,000 in the year to June 2031) before gradually rising to 718,000 in the year to June 2044. At the same time deaths are expected to rise throughout the period, from 650,000 in the year to June 2024 to 797,000 in the year to June 2044.

The projection is for births of 667,000 and deaths of 665,000 in the year to June 2026, a small net increase of 2,000, before reversing after that to reach 80,000 more deaths than births in the year to June 2044.

The population is still expected to grow, despite this shift from (to use the statistical terminology) ‘natural’ growth in the population (births exceeding deaths) to ‘natural’ contraction (deaths exceeding births). This is because the ONS has assumed net inward migration will continue at an average of 245,000 a year for most of the projection period, resulting in a projected growth in the population of 4.0m people or 6% (from 68.1m to 72.1m) over the next 20 years, in contrast with the 8.4m or 14% increase in the UK’s population over the past two decades.

Without inward migration, the likelihood is that the gap between deaths and births would be even larger than illustrated in our chart, given that a proportion of the children expected to be born will be the children of migrants.

This change in the demographics of the UK will have significant implications for the debate about migration over the coming decades, especially if the population absent migration is shrinking by 80,000 a year by 2044 as projected by the ONS. 

There are also implications for the public finances as, even with net inward migration, population growth is expected to be less than 0.3% a year over the next two decades instead of the 0.7% a year seen over the past 20 years. Not only will that reduce the potential for economic growth, but it will reduce the opportunities for efficiencies of scale in public spending that have been possible in previous decades.

The demographic tale of the 20th century in the UK was one of a rapidly growing population as many more children survived into adulthood, life expectancy increased significantly and migration offset a declining birth rate. The 21st century looks like being a very different story.

This chart was originally published by ICAEW.

ICAEW chart of the week: UK registered businesses

My chart this week looks at the 1.5% drop in the number of VAT- and PAYE-registered businesses in the year to 31 March 2023.

Column chart with two columns for March 2022 (left) and March 2023 (right).

Total registered businesses - 2,767,700 (March 2022) and 2,726,830 (March 2023).

Companies - 2,058,886 and 2,039,920

Sole proprietors - 427,710 and 413,160

Partnerships - 181,010 and 172,890

Non-profits & public sector - 100,095 and 100,860.

On 27 September 2023, the Office for National Statistics (ONS) published data on the 2,726,830 businesses that were registered for VAT and/or PAYE in the UK as of March 2023, a 1.5% fall from the 2,767,700 businesses that were registered a year previously. 

As illustrated by our chart this week, the number of VAT- and PAYE-registered companies fell by 0.9% from 2,058,885 to 2,039,920, sole proprietorships fell by 3.4% from 427,710 to 413,160, and partnerships fell by 4.5% from 181,010 to 172,890. 

Bucking the trend were non-profit bodies, mutual associations and public sector organisations, which rose by 0.8% from 100,095 to 100,860. The latter comprised 88,375 non-profit bodies and mutuals, 9,030 local authority entities, 3,280 central government entities and 175 public corporations and other publicly owned businesses, as of March 2023.

Not shown in the chart are in the order of 2.8m ‘unregistered’ businesses that are not registered for VAT or PAYE. Most of these are self-employed individuals, sole traders, or one-person companies that generate revenue below the VAT threshold of £85,000 and do not have any payrolled employees.

The number of registered businesses in March 2023 by industry group are comprised as follows: 

  • 415,250 professional, scientific and technical (down 3.7% on March 2022); 
  • 402,165 motor trades (-2.8%); 
  • 377,585 construction (+0.7%);
  • 226,285 business administration and support services (-1.1%); 
  • 187,360 information and communication (-4.5%); 
  • 184,420 arts, entertainment, recreation and other services (+2.0%);
  • 174,830 accommodation and food services (-0.2%); 
  • 151,710 production (-1.8%);
  • 141,390 agriculture, forestry and fishing (-0.8%)
  • 128,600 transport and storage including postal (-6.9%);
  • 113,785 (+2.8%) property, 109,095 health (+2.8%);
  • 59,210 finance and insurance (-2.0%);
  • 47,340 education (+1.3%); and
  • 7,805 public administration and defence (+0.4%).

There were 2,115,105 businesses with between zero and four employees as of March 2023, followed by 313,780 (five to nine employees), 157,955 (10-19), 86,285 (20-49), 27,660 (50-99). 15,135 (100-249) and 10,910 (250+).

By turnover band, the numbers as of March 2023 were: 445,020 (£0-£49,999); 563,610 (£50,000-£99,999); 846,615 (£100,000-£249,999); 367,315 (£250,000-£499,999); 222,155 (£500,000-£999,999); 123,995 (£1m-£2m); 85,655 (£2m-£5m); 32,100 (£5m-£10m); 29,080 (£10m-£50m); and 9,285 (£50m+).

The fall in the number of businesses in 2022/23 is perhaps not surprising given the significant amount of support provided to many businesses during the pandemic, which will have delayed the normal process of business closure during the previous two years. Meanwhile, the cost-of-living and energy crises will have also made it difficult for some businesses to survive in the year to March 2023. Even though energy prices have come down, the cost-of-living crisis and consequent reductions in consumer demand could see further businesses fail during 2023/24.

Find out more: ONS: UK business – activity, size and location 2023.

This chart was originally published by ICAEW.