THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

United Kingdom

Ranked 10th of 149

At a glance

Ranks

10 th on the Legatum
Prosperity Index™

10th
5th
11th
6th
20th
13th
15th
12th
10th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, United Kingdom performs best on Business Environment and Education and scores lowest on the Health sub-index.

Visit our Rankings table to see how the United Kingdom compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

The UK has the third biggest prosperity surplus in the world, up from ninth in 2007. The UK has a surplus in all sub-indices, though the biggest over-delivery comes in the Business Environment, Governance, and Personal Freedom sub-indices.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

The UK’s experience of the financial crisis has been traditionally regarded as one of relative economic success at the cost of social progress. This view was bolstered by the Cameron Governments’ focus on the UK’s comparatively strong growth rates and record employment levels, and the left’s criticism of a ‘social recession’. The Government made surprisingly little of social reform. Yet the Index shows that if anything, the economic success was over-exaggerated, and the social progress undersold.

Like many developed nations, the UK has been going backwards in terms of the quality of economic growth. While the Economic Quality sub-index reflects positives like increased labour force participation as a result of welfare reforms, the UK has still been in decline in this sub-index since the crash. Interestingly, it is not so much about poverty rates and pressures on household incomes. More Britons in 2016 are satisfied with their standard of living than in 2007. Instead, the economic challenge is structural. Non-tariff trade barriers are on the rise – though the UK remains 28th on this measure - and anti-monopoly policy is growing less effective. In 2007, the UK had the 4th most effective anti-monopoly legislation in the world. In 2016, the UK has slipped to 15th.

It is not only the economy where the UK is growing structurally less competitive, but in its business environment too. Entrepreneurship and business is something of a UK success story. Lower start-up costs and greater labour market flexibility for businesses have helped to improve the business environment in the UK in real terms. However, the Business Environment sub-index shows that the UK has fallen two ranks since 2007. The UK may be improving as a good place for business, but it is not necessarily growing more competitive, overtaken by both New Zealand and Canada.

Instead it is in the social aspects of the Index that the UK has made significant progress and from which its growing prosperity surplus comes. In Education, radical reforms to extend vocational training through the expansion of apprenticeships and the funding of University Technical Colleges, and efforts to improve education quality and the rigour of exams have seen the UK rise up the Education rankings from 14th in 2007 to 6th in 2016. This is the result of rising perceptions that children have the opportunity to learn, and the numbers of vocational pupils, which have nearly trebled since 2011.

Significant improvements have also been made in public safety. Crime itself has fallen markedly over the past decade. Murder and theft rates are lower, and perceptions of safety higher. 62% felt safe walking alone at night in 2007. For the last three years that has stood at just under 80%. The UK’s relative success in containing its sizeable terror threat has also contributed to improving performance in the Safety & Security sub-index. Trailing 5-year terror attack deaths, which in 2007 included those killed in the July 7th attacks in 2005, have fallen, despite sporadic violence from Islamist attackers and ongoing sectarian tensions in Northern Ireland.

In Health, despite the chronic problems in the NHS due to funding constraints and the rising demand from poor lifestyles and an ageing population, the UK has seen improvement in the Health sub-index in both real and relative terms. While satisfaction with the health system is falling (it was 84% in 2007 and 77% today), health itself is on the rise. 21% claimed to have a health problem that prevented them from doing things in 2007, today that is just 16%. Life expectancy has risen by over a year, and mental health has been relatively stable. However, additional pressures on the health system are reflected in rising obesity rates. Despite this however, the level of health that the UK is delivering with its wealth has significantly improved over the last decade.

Aside from falling economic competitiveness, the other key obstacle to rising UK prosperity is how well prosperity is shared within the country. Our recent UK Prosperity Index shows that urban areas are significantly under-delivering on prosperity relative to wealth due to an absence of life chances. If opportunity and the chance to fulfil potential is not available to the whole population, then prosperity is severely constrained. That the UK ranks 10th with the flourishing of only part of its population is an achievement in itself, but this inequity in opportunity must be addressed if the UK’s sizeable prosperity potential, and the potential of its people, are to be realised. As the third best deliverer of prosperity in the world – in turning wealth into prosperity – the UK’s potential is great indeed.


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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.

Special Analysis

Special Analysis

OVERALL

Alongside Finland and Switzerland, the UK has seen one of the largest real prosperity gains in the global top ten. The UK has seen prosperity rise in eight of the nine sub-indices, with the only decline coming in the Economic Quality sub-index, consistent with most other developed countries who have also seen a fall. The UK retains its place as the second most prosperous of the G7 behind Canada.

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Areas of Success
Areas of Success

The UK’s prosperity has been built on strong foundations like the Business Environment where it has always ranked in the global top seven. It also scores strongly in Economic Quality (10th) and Governance (11th). However, the biggest improvements have come in Education and Safety & Security. In Education, concerted efforts at reform, particularly in vocational training, have pushed the UK from 14th to 6th over the past decade. In Safety & Security, the UK has climbed from 32nd in 2007 to 13th in 2016 as crime has fallen and the terror threat has been well contained.

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Areas of Little Change
Areas of Little Change

Despite a real terms improvement, the UK has made little relative gain in the Health sub-index, rising just two ranks in the past ten years to rank 20th. Social Capital, while rising in its score, has been static at 12th globally. Improvements have been driven by rising voter turnout and rapidly rising volunteering. 23% volunteered in 2007, rising to 33% more recently. However, those saying they can rely on family and friends has fallen slightly, as have those reporting they have sent financial help to others.

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Areas of Improvement
Areas of Improvement

If the UK is to climb well into the top ten, then its weakest performances need to be addressed. Health, while not on the decline, is still one of the UK’s lowest ranks at 20th. Personal Freedom, while strong, has been falling in relative terms, slipping from 10th to 15th over the past decade as rising tolerance and rights are undermined by increasing social restrictions on religion and falling press freedom. So too has the UK's good performance in Natural Environment been falling, from 4th to 10th, as the over exploitation of fish stocks grows worse. This is one area where EU exit is an opportunity for the UK to implement tough domestic policy to drive up environmental protections. Elsewhere, performance has been good, with air pollution and land protection improving.