Why Britain’s economy will overtake Germany’s

What’s the most surprising thing that could come out of the current economic upturn? A rapid revival in northern manufacturing? The City really getting behind small British businesses? Ed Balls admitting higher public spending wasn’t always the best way to promote growth? Any of these eventualities would be fairly amazing. But the biggest surprise would perhaps be this: a gradual realisation that the UK is on track to become the largest economy in Europe.

In the 19th century, at the height of the industrial revolution, the UK outproduced all of its European competitors. It steadily lost that position, however, ceding industrial leadership to the Germans and the French. In the next couple of decades that pattern will start to reverse. As the recovery gathers steam, we are likely to out-perform the rest of Europe. And that will change the way this country is perceived, both by global businesses and by investors.

The rankings of European economies are not set in stone. Right now, Germany is by far the biggest, with a GDP of $3.6 trillion. France stands at $2.7 trillion, the UK at $2.2 trillion, Italy at $2.1 trillion. If you count Russia as part of Europe, it slots into the table between us and the Italians. But over time, those positions have moved around. Back in 1987 the Italian economy overtook ours, a moment celebrated in that country as ‘Il Surpasso’, and indeed in the early 1990s Italy even overtook France. A couple of difficult decades later, Italy and Britain are tussling for fourth place.

The next decade will be a lot better for us, however. Our recovery may look tepid by historical standards; the mountain of debt, public and private, is too enormous for a rapid acceleration of growth, and there is little sign of a surge of productivity to kick-start a really strong upturn.