British Economy Worst Hit In G7 As Brexit, Political Chaos Bite


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“They are now eventually, belatedly being seen. But the Conservatives are not going to touch”

Britain’s economy is
forecast to shrink by 0.4% in 2023, more than any other in the Group of Seven
richest nations, according to the Organization for Economic Cooperation and
Development (OECD). Britain is the only G-7 member whose economy has yet to return
to pre-pandemic levels.

 
In the Group of 20, or
G-20, largest economies, only Russia’s is expected to fare worse than Britain’s
in the coming two years.

 
The OECD said Tuesday
that global growth would slow down significantly, including in the United
States and Europe. Only the British and German economies are forecast to
contract in 2023.

 
The forecast comes days
after Paris overtook London as Europe’s biggest stock market. Analysts say
global economic pressures have been compounded in Britain by recent political
chaos.

 
Cost crisis

 
The British
government’s Office for Budget Responsibility, which gives an independent
analysis of the nation’s economy, warned that living standards over the next
two years are set to fall by the biggest amount on record, as disposable income
is squeezed by stagnating wages and rising prices.

 
Inflation is at a
41-year high of 11.1%, driven by soaring energy bills. Food costs have
increased by 15% since this time a year ago.

 
Britons are cutting
back on spending. Hayley Gray, who lives in Bradford, northern England with her
seven children, says Christmas this year will be very different.

 
“Each week I’d normally
buy a couple of things, but I’m not able to, because I’m having to make sure
I’ve got money for gas and electric … [The children] are going to have hardly
anything come Christmas,” Gray told ITN News. Like many families, Gray is
taking on debt to pay for the festive period. She said she fears she may not be
able to pay it off in the new year.

 
Charity food banks are
seeing unprecedented demand.

 
“It used to be that
those people on the margins of the society who couldn’t access a kitchen were
homeless people, who needed that support. Now it’s people in work, it’s people
who can’t afford to turn on their cookers, who are needing support,” said
Charlotte Hill, CEO of the Felix Project charity in London.

 
Tax rises

 
Britain’s economic pain
is likely to worsen. The country’s new chancellor, Jeremy Hunt, announced new
tax increases and spending cuts last week to try to reduce the deficit and
reassure financial markets. He blamed the coronavirus – and Russia’s invasion
of Ukraine.

 
“Global factors are the
primary cause of current inflation,” Hunt told lawmakers November 17. “Most
countries are still dealing with the fallout from a once in a century pandemic.
The furlough scheme, the vaccine rollout and the response of the NHS [National
Health Service] did our country proud. But they all have to be paid for.”

 
The furlough scheme
refers to the government subsidizing millions of workers’ wages during the
pandemic lockdown.

 
“The lasting impact on
supply chains has made goods more expensive and fueled inflation. And this has
been worsened by a made-in-Russia energy crisis,” Hunt said.

 
Ideology

 
Those crises are global
but Britain has unique problems, said analyst John Kampfner of the London-based
policy institute Chatham House.

 
“Britain’s politics and
Britain’s economy are both in a state of somewhere between disarray and mayhem.
Of course, all countries are facing considerable difficulties from inflation to
energy insecurity shortages, price rises and other associated difficulties. But
they are compounded in Britain by a series of ideologically driven governments
whose competence was very much open to question, culminating in the disastrous
45 days of Liz Truss,” Kampfner told VOA.

 
Former Conservative
Prime Minister Liz Truss’s plans to slash taxes and boost spending – the
reverse of her successor, Rishi Sunak – sent government borrowing costs soaring
and the British pound plummeting, ultimately forcing her to resign

last month. The effects
are still being felt.

 
London overtaken

 
For the first time
since record-keeping began, Paris last week overtook London as Europe’s biggest
stock market, according to figures from Bloomberg News, based on the combined
market value of listings on the Paris bourse compared to the London Stock
Exchange in U.S. dollars.

 
French luxury goods
makers have seen significant share price increases in recent weeks, while the
British pound has fallen more sharply than the euro, reducing the relative value
of British shares.

 
Brexit

 
Analysts say Britain is
suffering from another homemade problem: Brexit. Britain’s 2016 vote to leave
the European Union meant new economic barriers with its biggest trading
partner.

 
Simon Spurrell founded
the Cheshire Cheese Company in 2010 and built a prosperous export business.
When new Brexit trading rules took effect in 2021, the company lost $285,000
worth of European business. Last month, Spurrell decided to sell to a bigger
local rival, Joseph Heler Cheese, which has a presence in the EU and so is able
to trade freely.

 
“We no longer have
access to the EU, (which) meant that we needed to try and find a solution,”
Spurrell told Agence France-Presse. “We now have a majority shareholder owner
in Joseph Heler, which means we not only have access to the EU again, due to
their Netherlands hub, we also have the ability to grow again.”

 
It’s clear that Brexit
is holding back growth, Kampfner said.

 
“It was camouflaged by
the pandemic in 2020 and 2021, so the direct consequences of many of the Brexit
decisions couldn’t be discerned,” he said. “They are now eventually,
belatedly being seen. But the Conservatives are not going to touch a decision
to go anywhere close to rejoining the (EU) customs union or the single market.
And (the opposition) Labor is not going to do that either.”

 
The prime minister made
that policy clear in a speech Monday at the Confederation of British Industry.

 
“I voted for Brexit, I
believe in Brexit, and I know that Brexit can deliver, and is already
delivering enormous benefits and opportunities for the country, migration being
an immediate one, where we have proper control of our borders,” Sunak said.

 
VOA


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