The Eurozone: Was the UK Right to Opt Out?

Julian Gough

Published: September 2015

This article examines the performance of the British economy since the beginning of the single European currency in 1999, in relation to that of the Eurozone countries. The aim is to consider whether the retention of sterling with the freedom to pursue an independent monetary policy produced a better economic performance. Relative performance between the UK and the Eurozone countries is measured between 1999 and 2014 in terms of inflation, real GDP growth, the government public budget deficit/surplus and total government debt. The evidence indicates that the U.K. outperformed the Eurozone on almost all criteria until 2005, whereas in the following five years this better performance was gradually lost during the period of the global economic and financial crisis. However, since 2010 the UK has again outperformed the Eurozone on most measurements. The poor showing of the UK in the middle period can be attributed to policy failures by the third Labour government resulting in a deterioration in government finances, huge budget deficits and increased government debt. Since 1999 the decision to remain out of the Eurozone appears to have been justified.