That’s the conclusion arrived at by Scott Sumner (The Money Illusion).
It “appears that the recent British stagnation is 75% to 80% supply-side and 20% to 25% demand-side.
In other words, when Keynesians blame the slow British RGDP growth on the mythical “austerity” they are talking nonsense. This is partly because the unemployment numbers suggest that the British economy does not have a particularly large output gap, when compared to other developed economies, which means their massive budget deficit (trailing only Egypt and Japan) really does indicate a fairly expansionary fiscal stance. And second, because even if fiscal policy is quite austere, the slow RGDP growth is mostly due to supply-side factors such as declining North Sea oil output, less froth in high finance, and perhaps other factors such as labor shifting out of home-building. (I’m open to suggestions.)”
Here is the post.