We don't even really make cars etc any more that's the problem. Thatcher, may her soul burn for an eternity, completely destroyed most of our Primary and Secondary industries, made us into a Tertiary-based economy. Look at Rolls Royce. Aston Martin etc, Britain used to have a reputation for quality and innovation, but that has died in the name of short-term profit, those product are now largely owned by offshore companies now.
The problem isn't that the quality is falling or that we are 'backward' in any way, it's that all of our main production industries simply don't exist any more, we truly are a nation of shopkeepers these days, as well as i-dotters, t-crossers and paper-filers.
Rather than being 'stunted' as you put it, the UK was actually a centre of world innovation after the war, whether it was artistic, industrial or even social, but, as you say, in the last 20 years most of those manufacturing industries have moved abroad, our artistic industry has been, ironically enough, 'Americanized' (which makes no sense as a word, since America actually has quite a diverse artistic populace) and our social system has been constricted by a series of laws that are very similar to America's own Patriot Act and connected legislation.
Edit: Basically, what is happening in the UK is being mirrored across the Western world in one way or another, it might be beneficial to hold a mirror up to every country involved before we define who is 'backward' and who isn't.
