The British economy is doing hardly better than Putin’s
Two years ago, Brexit was a reality. The expected chaos did not materialize in January 2021, but the British economy slowly sank.
Analysts say the UK economy will be the worst performer of any major developed country next year. In its latest forecast, leading bank Goldman Sachs assumes that the British economy will contract by 1.2 percent this year. The US economy is expected to grow by 1%, and Germany faces a moderate recession of 0.6%. The UK’s decline of 1.2 percent is close to that of Russia, with Goldman Sachs forecasting a contraction of 1.3 percent. KPMG is even more negative for the British: the chancellor predicts a recession of 1.3%.
More than other countries, the United Kingdom suffers from a purchasing power crisis. Inflation of more than 10 per cent is barely offset by increases in wages, which means British households are heading for a real loss in purchasing power of 4.3 per cent, according to the Office for Budget Responsibility.
As a result of Brexit, the United Kingdom has become less attractive for companies to invest, which means that business investment next year in the country will also collapse more deeply than in the eurozone. Less investment also means less job creation, which is why KPMG predicts an additional 680,000 British unemployed. This also exacerbates the loss of purchasing power.
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The British economy is also more vulnerable to higher interest rates than others. Families have more variable rate loans than countries like Belgium or Germany. Higher interest rates automatically mean higher payments, which means savings must be made on other expenses.
Since Brexit, British small and medium businesses have complained bitterly about difficulties in exporting or attracting foreign workers. Britain’s think tank on European reform estimated that the UK economy has grown 5.5 per cent slower since exit than if the country had stayed in the EU. In addition, the United Kingdom is also experiencing a violent strike wave.
Yesterday, Prime Minister Rishi Sunak proposed a five-point plan to combat the disease. For example, he promised that inflation would be halved this year. The economy should grow again this year, and Sunak sees mounting government debt reduced at the end of this year. He also promised to reduce healthcare waiting lists and to return refugees who arrive in the UK illegally by boat more quickly.
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