The UK has the worst growth prospects of any developed country. According to an OECD forecast published last month, the UK economy will not grow at all in 2022. This is the lowest forecast among all OECD countries. It also comes after the IMF expressed concern in April that the UK will have the weakest growth among the G7 countries in 2023. It seems that the British must accept the fact that the strong growth of the post-2000 decade is a distant memory after a decade of wage stagnation. [1]
The UK's economic misery, highlighted by the 2008 financial crisis, is long-standing and systemic. The financial crisis of 2008 was supposed to prompt major economic changes, such as a definitive reckoning with the UK's reliance on growth fueled by a surge in consumer debt made possible by rising house prices.
Brexit took the British economy in an absolutely wrong direction and brought changes that did nothing to help the recovery from the financial crisis. The fragile political settlement of the Good Friday Agreement in Northern Ireland has been undermined and Britain's economic problems have been exacerbated by Boris Johnson's hard Brexit strategy, which involves removing Britain from the EU's political and economic institutions in a reckless pursuit of a 'clean break'.
Brexit has also affected the price of the pound. The fall in the value of the pound has increased the cost of imports while reducing British exports, which has contributed to an increase in the cost of living. Forecasters predict that the pound will lose further against the dollar and the euro, especially if relations between the UK and the EU over the Northern Ireland protocol continue to deteriorate. [2]
Even the Prime Minister and Lord Chancellor cannot agree on the basis of the Government's approach and a planned joint speech this week by the two leaders has been postponed. The Chancellor has been rebuked by the OECD for his fiscal policy, which is generally contractionary despite the huge support package he announced last month and also despite the economy desperately needing a boost.
Sensible opinions in Britain in this situation are thin on the ground. For example, Conservative MP Tobias Ellwood has in the past argued for Britain's re-entry into the EU single market, but has come in for heavy criticism from Brexit ideologues. A number of indicators signal that a stronger economic relationship with the EU is inevitable for Britain. However long it takes, Britain should be ready to reclaim its place as a sick citizen of Europe.
Commentary by CapitalPanda chief analyst Jozo Peric
[1,2] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.
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