SWEDISH ECONOMIC POLICY REVIEW 1 (1994) 113-149 Deregulation and Unemployment - The UK Experience Patrick Minford* Summary. H The UK's natural rate of employment is estimated, using the Liverpool Model of the UK. The conclusion is that micro rigidities in the labour market have been substantially diminished by the supply-side reforms of the 1980s but that macro policy has been particularly savage during 1989-92, as a by-product of the ERM experiment. It is argued that there is therefore promising scope for bringing unemployment down sharply without re-igniting infla- tion. Recent trends appear consistent with this view. The implica- tions for Sweden are that "supply-side" reforms (which must oper- ate through lowering wages costs) can have beneficial effects on the natural rate but that they take a long time to work, particularly if demand policy is working against them as in the recent ERM epi- sode. H * The author is Edward Gonner Professor of Applied Economics, University of Liverpool since 1976 Since./anuary 1993, also Visiting Professor, CardzffBusiness School. Member of Mono- polies and Me~gers Commission since March 1990. One of the H M Treasuiyi Panel of Forecasters ("7 Wise Men'? since its inception injanuary 1993. 113