UK 'will top Europe's economic league'

BRITAIN'S economy will become Europe's biggest within a generation, a report said yesterday. It is growing at such a fast rate that the UK will regain the top spot from Germany within 20 years.

It would be the first time since 1959 that Britain had held the number one position. The report, from Barclays Bank, will be a boost for Gordon Brown, who has boasted of the strength of the economy compared with European rivals.

But it implied that much of Britain's success is due to the changes made to the economy during the 1980s by Margaret Thatcher, including labour market reforms and defeat of the unions.

Germany and France - Europe's two other big economies - are only now making efforts to push through similar measures.

The report said the British economy will become 'unequivocally' the largest in Europe.

Its author Christopher Smallwood argued in the report: 'The assumptions relating to the UK are deliberately cautious, yet even so the British economy slowly closes the gap with Germany until, early in the 2020s, it becomes bigger - and thereafter, the gap continues to widen.'

Mr Smallwood, the bank's chief economic adviser, acknowledged that at £1,000bn Britain's gross domestic product is currently much lower than Germany's £1,335bn.

Germany's economy is bigger than Britain's because its population is a third larger, the report said. But it argued that the gap will narrow as Germany's workingage population shrinks by 20% over the next 25 years from 56m to 44m. At the same time, Britain's working-age population will rise slightly.

The report suggested Britain's economy will grow at between 2.5% and 1.25% a year over the next 20 years. That compares with 1.5% and 0.5% in Germany.

Britain overtook France in 2000 to become the second biggest European economy and the fourth in the world.