National Minimum Wage

Chapter 1: The Economic Context to the October 2011 Upratings
Figure 1.2: Gross Domestic Product in Recession and Recovery, UK, 1979-2011
GDP (GDP = 100 at start of recession)
101
100
99
98
97
96
95
94
93
92
0
1979 Q4
1990 Q2
2008 Q1
1
2
End of 1980s and
1990s recession
Revised end of
2008-2009 recession
1980s 1990s 2008-2009
old
3
1991 Q3
1981 Q1
2009 Q2
4
5
6
2009 Q3
Previous end of
2008-2009 recession
7
Quarter
8
2008-2009
revised
2010 Q3
9
10
11
1983 Q1
1993 Q3
12
13
14
101
100
99
98
97
96
95
94
93
92
GDP at start of recession = 100
Source: LPC estimates based on ONS data, GDP (ABMI), quarterly, seasonally adjusted, UK, Q4 1979-Q3 2011.
Note: Quarter 1 is the first quarter of the recession (1980 Q1 for the 1980s, 1990 Q3 for the 1990s, and 2008 Q2 for the 2008-2009
recession).
Spending, Investment and Trade
1.12 The composition of growth is important as it provides the economic context in which the
low-paying sectors operate. Many of the low-paying sectors are dependent on consumer
spending. The sluggishness of household consumption in the recovery, particularly over the
last four quarters, has direct implications for retail; hospitality; leisure, sport and travel; and
hairdressing. It will also have knock-on effects on other low-paying sectors such as cleaning
and security that are dependent on the strength of retail and hospitality for some of their
business.
1.13 Government spending also plays an important role for many low-paying sectors. Although
there is direct public provision of childcare and social care, the public sector also funds much
of the childcare and social care supplied by the independent and private sectors. Further,
government spending is also important to the hospitality, and leisure, sport and travel
sectors. Government spends a significant amount on hotels, restaurants and travel, 1 while
local authorities subsidise and promote leisure and sports facilities.
1.14 Trade will be a significant factor in low-paying sectors that depend on export markets, such as
food processing; the manufacture of textiles and clothing; and agriculture. Trade also affects
hospitality and retail through numbers of tourists and the amount they spend in the UK.
1 In 2008/09, according to the Office of Government Commerce Public Sector Procurement Expenditure Survey (PSPES09), the
Government (including Central Government organisations and English local authorities) spent at least £3 billion on travel, hotels,
food and catering.
5