The UK population is rising and is forecast to rise to over 71 million by 2031. This is a look at the economic and social impact of a rise in the population.
UK population projections at BBC
The growth of the UK population raises many issues, some positive and some negative. From an economic perspective, the population growth is generally good news. The growing population will increase the productive capacity of the economy, and help the UK avoid a demographic time bomb through improving tax revenues. However, a growing population will exacerbate existing problems, such as the long standing housing crisis and shortage of supply. To deal with the rising population and congestion, we are likely to see increased building on greenbelt land and a change in the UK’s landscape.
On the one hand, population growth will help the UK economy become one of the largest in the EU, but as a consequence we will have to deal with increased congestion and increased demand on local infrastructure.
The UK is already struggling to meet existing demand for housing. A rising population will put even more pressure on housing; also, the rise in number of households is greater than the rise in the population due to growth of single occupancy households.
As mentioned in housing crisis, the UK already has a persistent shortage of housing. Demand is rising faster than our willingness to build. This shortfall is causing an increase in long-term house prices, reducing affordability. If the UK population continues to grow to 71 million plus it will, ceteris paribus, put upward pressure on house prices. It will require a dramatic change in housing policy and could require large scale new towns to catch up with the shortage.
If supply of housing fails to meet the growth in the number of households, it will increase the cost of living. House prices will rise and the cost of renting will also continue to rise. This is likely to exacerbate the growth in wealth inequality we have seen in the past few years.
Arguably we could deal with the housing shortage, if the political will is there. In the 1950s, we built 400,000 new homes a year. But, given the current resistance to even moderate new home building programmes, 300-400,000 new homes a year will be very difficult.
Limiting the impact of an ageing population
Many countries with declining populations are seeing a rise in the percentage of people over retirement age. This puts pressure on government spending (health and pensions) and leads to lower tax revenues (See: impact of ageing population). The UK population is rising due to net migration and higher birth rates. This means the UK has a higher % of people of working age, who are net contributors to the exchequer (paying income tax, not receiving pensions)
Therefore the growth in the population improves the long-term UK budgetary position, reducing the need for spending cuts and / or tax increases.
The growth in the working age population also increases the size of the UK labour force, enabling higher productive capacity. This will help increase UK real GDP compared to other countries. (note, GDP per capita – GDP per head may not be affected by a growing population.)
Increased efficiency of greater population density
Increased population density is more efficient from both an environmental and economic perspective. The highest carbon per capita consumption comes from rural / low population density areas. There are economies of scale in providing transport and infrastructure which helps reduce the per capita impact on both government spending and the environment. (Report: increased efficiency of higher urban density) (Study: efficiency of public services from higher density)