When asked to provide a clear-eyed assessment of Britain’s diminished status, one quickly realizes there is so much to discuss that organizing the notes becomes harder than the days spent preparing them in the first place.
Perhaps we can begin to answer the question posed in the title if we can make sense of the peculiar predicament facing Britain’s security establishment — the bureaucratic class produced by institutions such as RUSI, the IISS, Chatham House, and their intellectual feeder school, King’s College London’s Department of War Studies. Or perhaps we can find a rational explanation for the prime minister’s slow political demise.
Prime Minister Sir Keir Starmer appears to have grasped, at least to some extent, what the Green Party’s gains in Hackney, Haringey, Southwark, Lambeth and other parts of inner London mean for Labour. Young, idealistic, pro-European, anti-billionaire, sourdough-baking voters no longer see themselves as part of Labour’s coalition — and they have plenty of reasons for feeling that way.
The Epstein files were supposed to bring down a president in the United States. Instead, it is Britain’s hapless prime minister who seems to be leading that race. Parliamentary inquiries into Lord Mandelson’s appointment as ambassador to Washington continue. As testimony is heard — including from genuinely senior officials — it is astonishing to watch people modestly claim that they could see both the “advantages and disadvantages” of appointing Mandelson. The disadvantage, of course, was his close friendship with a convicted sex offender; the advantage was that the U.S. president might have had similar associations. Those advancing such arguments likely had little idea that, in their descent into this political abyss, they were taking a prime minister and a country with them.
Yet few experiences have felt quite as humiliating as watching attempts to argue that this situation is entirely different from the way Starmer sought to damage Boris Johnson using essentially the same mechanism and with the same intended outcome. One also learns that humiliation can become familiar, because discovering that Conservative MPs may have a point evokes a similar feeling.
Whitehall still has no convincing explanation for how Peter Mandelson was appointed Britain’s ambassador to Washington despite reservations reportedly raised by the United Kingdom Security Vetting service (UKSV). Instead, officials continue to offer vague declarations of virtue and engage in symbolic dismissals that accomplish little. Far from inspiring confidence in the functioning of the British state, they make effective government appear increasingly like a utopian ideal drifting further out of reach.
It later emerged that Starmer, a former director of public prosecutions, had been briefed not only about Mandelson’s well-publicized friendship with Jeffrey Epstein but also about his business links to China and Russia through the consulting firm Global Counsel. In November 2024, Cabinet Secretary Simon Case explicitly warned the prime minister that if he intended to make a political appointment to the Washington post, the Foreign Office would develop a review process designed to identify any issues he “should know about before approving the choice.” For reasons Starmer has yet to explain, that advice was ignored.
An article I read recently in the Financial Times concluded with the observation that, while historian Greg Rosen credits Mandelson with playing a significant role in Tony Blair’s landslide Labour victory in 1997, history may ultimately remember him for playing an even greater role in undermining Labour’s landslide victory in 2024.
When Labour was in opposition, trust and transparency were among its defining principles. The erosion of Starmer’s ethical instincts is becoming one of the tragedies — and mysteries — of modern British political history. Perhaps, as the curtain falls on Britain, we are left merely watching the actors on stage.
Financial indicators are becoming alarming
Deloitte has forecast that 250,000 British workers will lose their jobs by mid-2027 and that unemployment will rise to 5.8%. The country is once again facing the risk of recession. Despite what Keir Starmer and Kemi Badenoch may claim, Britain’s economic problems long predate the Iran war.
Britain has fallen far behind its peers. The 15 years following the 2008 global financial crisis saw virtually zero real wage growth, while productivity has remained stagnant for more than a decade. Nearly every public service is visibly struggling under the legacy of chronic underinvestment.
Andy Burnham, widely seen as a potential successor to Starmer, has described Britain’s predicament in terms of “four horsemen”: deindustrialization, privatization, austerity and Brexit. The first two are merely shadows cast by the elephant in the room. The last is a chain of misguided responses to the damage already done. The elephant itself is the financial sector.
“Financialization” — the growing dominance of finance and the accumulation of financial assets — remains at the heart of Britain’s problems. Excessive financialization has severed the link between corporate profits and productive investment, inflated asset prices and living costs, weakened manufacturing and research and development spending, and left the economy structurally vulnerable to the policy failures that followed successive crises. Add the impact of geopolitical shocks on international trade, and the vulnerability created by the absence of a strong domestic manufacturing base becomes unmistakable.
Data from the Office for National Statistics show that average real weekly earnings in Britain recorded zero growth between March 2008 and June 2023. By contrast, cumulative real wage growth in France and Germany exceeded 10% during the same period.
Private investment has also declined dramatically since the beginning of 1989. As a share of gross domestic product, private fixed capital formation and net investment have fallen by 30% and 76%, respectively. These are extraordinary figures. A narrower measure — business investment, excluding financial institutions, non-profit organizations and residential investment — has declined by 51% as a share of GDP since its peak in the mid-2000s.
At the same time, average real wages have endured their longest sustained decline since at least the Victorian era. The already weakened relationship between profits and investment, undermined by decades of financialization, was further damaged by deliberate policy choices.
The recovery that began in the early 2010s was interrupted by Brexit in mid-2016. Some estimates suggest that Brexit accounts for roughly one-third of the cumulative growth shortfall since 2016, with reduced investment representing the single largest component of that gap. Real wages recovered only during the pandemic period, when labor shortages and disruptions in hiring temporarily altered long-term trends.
Taken together, these figures amount to a disaster for Britain.
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