A personal view from Ian Stewart, Deloitte’s Chief Economist in the UK.

The past, as the novelist LP Harley wrote, “is another country, they do things differently there”.

And things were different in the year 2000. The global economy was booming. The 3.5% growth rate in the UK and the 3.8% figure in the euro area that year have not been bettered in the 19 years that followed.

Tony Blair was in Downing Street, George Bush was in the White House and Vladimir Putin had just become president of Russia. The events of 9/11, and the subsequent wars in Afghanistan and Iraq lay ahead. The euro was just a year old and the EU was debating whether to expand into central and eastern Europe. Nokia ruled the roost in mobile telephony and the world was getting by without Facebook, Skype, Instagram, YouTube or Twitter. Twenty-five percent of UK households were able to access the internet through a dial-up connection, most using a desktop computer. Britain’s first commercial broadband service was launched in March 2000.

Much has changed since then.

Britain’s population has increased, become older and more international: 8.3m more people live in the UK today, an increase of 14%. London’s population has increased by 25%. There are 37% more over-70s around today but only 6% more children and teenagers. Despite this, the ratio of state pensioners to those of working age has fallen due to the rise in the female state pension age.

The UK economy grew far faster in 2000 than it has in recent years, yet the unemployment rate today, at 3.8%, is well below the 5.5% rate seen in 2000.

The number of people in self-employment has soared since the millennium, rising more than 50%. Numbers in part-time and full-time employment have risen by 17%. Evidence on the “casualization” of the workforce is mixed. So called zero-hours contracts have risen from less than 1% to over 2.5% of the workforce. But temporary employment has shrunk from 7% to 5% of employment, the lowest recorded, and part-time employment remains pretty flat at about 25% of the workforce.

Those over 65 are also now twice as likely to still be working as in 2000, in part due to the abolition of mandatory retirement at 65 in 2011. Younger people play a smaller role in the labour market because of the new requirement to stay in education or training until the age of 18. The proportion of young people going to university has risen from just over 30% to 50%. Overseas student numbers have quadrupled.

Employment among women has increased far more rapidly than among men and the average age of first-time mothers has increased by more than two years, to 28.8. Rising rates of participation in the labour force by women and older people has increased employment, but immigration has been the biggest factor behind job growth. About two-thirds of the 5.6m increase in the UK workforce since 2000 has been due to immigration.

The shape of the economy has changed radically. Over one million fewer people work in manufacturing, a decline of more than a quarter. Manufacturing output is unchanged, demonstrating how automation and a focus on higher-value products have helped lift productivity. Technology, education and healthcare have increased their headcounts by 40%-50% in the last 20 years. Those in work are less likely to go on strike. The number of days lost due to strike action in 2019 was less than half that in 2000, despite a substantial increase in the size of the workforce.

A largely unnoticed change has been the decline in the number of public companies – those whose shares can be freely traded on a stock exchange. At the end of the 20th century, there were 12,400 public companies in the UK. Since then the number has dwindled to 5,700. Private companies are on the rise, with their numbers increasing from 1.3m to almost 4m.

Government is bigger today, with government spending accounting for 38% of GDP, up from 34% in 2000. The financial crisis and the anaemic growth that followed set government on a borrowing spree that lifted government debt from 28% of GDP to over 80%. But with interest rates near historic lows the government currently has to pay only 0.5% to borrow money for ten years, down from 5.7% in 2000.

Government spending is increasingly focused on the NHS and old-age benefits. A number of areas within the public sector have faced deep cuts, among them working-age benefits, police, prisons and local government.

Yet despite the depredations of the global financial crisis and public sector austerity we are getting richer. Real GDP is 37% higher than in 2000 and per capita GDP has risen by 20%.

The price level has risen 51% since 2000, with prices rising far faster for services than goods. The cost of medical services, for instance, have risen 130% in the last 20 years. Education costs have risen by a factor of almost four reflecting the rising cost of university tuition and higher independent school fees.

The scope for productivity gains is greater in goods than services, partly because making things lends itself to automation and the use of new technologies. The scale of price deflation in some goods sectors is remarkable. Clothing and footwear prices have halved since 2000. Second-hand cars are 40% cheaper. The price of audio-visual equipment has fallen by 80%.

Patterns of energy consumption have changed significantly. UK greenhouse gas emissions have fallen by 37%, in part because coal now generates less than 1% of our electricity, down from almost one-third in 2000. Energy generated by renewables such as wind and solar has increased ten-fold. In terms of transport the clear losers are buses and coaches, with total miles travelled falling by 24%. Total car passenger miles have risen by just 5% while the number of rail passenger journeys is up by almost 90%.

Falling carbon emissions partly reflect a growing tendency to import goods whose production requires high levels of energy inputs, rather than producing them at home. When carbon emissions from the production of the goods we consume is included, the decline in UK greenhouse gas emissions is less impressive.

The year 2000 was the peak of the economic cycle for the rich countries of the world, including the UK. Growth was about as good as it gets. With the collapse of Soviet communism and China’s rapid industrialisation, capitalism seemed triumphant. The world seemed to have entered an era of strong growth, greater predictability and breakneck globalisation.

Twenty years on things look rather different. Growth has slowed everywhere, including in the UK. Otherwise the big trends here have been towards a more populous, older and international country, one which, despite the de-rating of growth prospects, has done better than most in creating job opportunities, especially for women and older people.

Rapid population growth, driven by immigration, has been one of the unanticipated features of the last two decades. The financial crisis has left us with a larger, more indebted government, one that is spending ever more on health and old-age benefits. It has also left us with borrowing costs that would seemed unimaginably low 20 years ago. From today’s vantage point the year 2000 does, indeed, seem like another country.