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David Smith, Economics Editor
The Times Online

Living standards in Britain are set to rise above those in America for the first time since the 19th century, according to a report by the respected Oxford Economics consultancy.

The calculations suggest that, measured by gross domestic product per capita, Britain can now hold its head up high in the economic stakes after more than a century of playing second fiddle to the Americans.

It says that GDP per head in Britain will be £23,500 this year, compared with £23,250 in America, reflecting not only the strength of the pound against the dollar but also the UK economy’s record run of growth and rising incomes going back to the early 1990s.

In those days, according to Oxford Economics, Britain’s GDP per capita was 34% below that in America, 33% less than in Germany and 26% lower than in France. Now, not only have average incomes crept above those in America but they are more than 8% above France (£21,700) and Germany (£21,665).

“The past 15 years have seen a dramatic change in the UK’s economic performance and its position in the world economy,” said Adrian Cooper, managing director of Oxford Economics. “No longer are we the ‘sick man of Europe’. Indeed, our calculations suggest that UK living standards are now a match for those of the US.”

Although many people will be surprised by the figures, Americans have long complained that average incomes have been stagnant in their country. One often-quoted statistical comparison suggests that in real terms the median male full-time salary in America is no higher now than it was in the 1970s.

Oxford Economics says that while the comparisons are affected by sterling’s high value against the dollar, they also reflect longer-term factors. “The UK has been catching up steadily with living standards in the US since 2001 � so, it is a well established trend rather than simply the result of currency fluctuations,” its report says.

It concedes, however, that a significant fall in the pound against other currencies would push Britain back down the ladder. It has assumed an exchange rate of just over $2 for the purpose of the calculation but in recent days the pound has slipped below that level.

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