Boris Johnson is under pressure to abandon national leadership in a critical economic moment, leaving behind a harsh outlook and an uncertain Brexit legacy.
On Thursday afternoon, Johnson said he was reluctant to resign “when the economic situation is very difficult.”
It’s a time that is often compared to the 1970s in Britain, an era of stagflation, when the economy shrank, inflation surged, strikes spread, and vibrant services ceased. The UK hasn’t repeated this stagnation yet, but the threat is there.
Domestic inflation reached 9.1% annually, the highest in 40 years due to the blockade of the pandemic and the disruption of the supply chain due to the war in Ukraine. And as companies begin to pass on increased costs to their customers and workers demand higher wages to cope with rising living costs, price pressures continue to rise.
Households are facing the worst pressures on living standards across generations as wage growth is not keeping up with inflation. Inflation is not expected to peak at least until the fall, when household energy tariff caps are reset. Disposable household income is expected to decline by more than 2% this year, adjusted for inflation.
According to Oxford Economics, this is the worst since 1945.
Andrew Goodwin, Chief Economist of the United Kingdom at Oxford Economics, said: For low-income households, “things will get worse because the prices of food, petrol, energy, etc. that spend more are rising most rapidly, so their inflation rate will be even higher. prize.”
Workers called for a strike to prepare Britain for a summer of labor insecurity when wages were far behind inflation. Recently, train workers and criminal defense lawyers have quit their jobs, threatening health care workers, school teachers and postal staff to strike in the coming months.
Anxiety and anger reflect the pain that many families feel. Johnson and his former Prime Minister Rishi Sunak, who resigned on Tuesday, sought to ease some of this burden when they announced in May that they would pay another living expense and reduce their bills. But for low-income households who couldn’t build up their savings during the pandemic, the difficulties were already widespread. Food bank usage increased during the pandemic, even before the recent surge in inflation.
Johnson’s resignation leaves considerable uncertainty about the government’s next move to deal with financial difficulties. It can cause delays in the introduction of the next budget, where spending and tax decisions are determined. An important question for investors and economic analysts is what the future of fiscal policy will be, and whether the new prime minister, the British Minister of Finance, will overturn the last prime minister’s tax hike on many workers. is.
Many of the economic shocks that are currently hitting the UK, such as soaring energy prices, are shared with other countries, but the UK outlook is particularly difficult.
Jacuzzit S. Chada, director of the National Institute of Economic and Social Studies, said:
The Institute expects UK economic growth to be modest this year and next, exacerbating the long-term problems of unequal wealth and income distribution. At the same time, Mr. Chada said Brexit is a “slow punk” to the UK economy, building trade barriers, European Union citizens leaving the labor market and policy uncertainty discouraging corporate investment. Therefore, he said he was slowing down growth.
“This isn’t a very attractive picture I’m drawing,” Chada said. “But this is the inheritance of the next Prime Minister and the accompanying Cabinet.”
Inflation FAQ
What is inflation? Inflation is the loss of purchasing power over time. So tomorrow the dollar won’t fall as much as it does today. This is usually expressed as an annual change in the prices of daily necessities and services such as food, furniture, apparel, transportation and toys.
The Bank of England governor Andrew Bailey said last month that the UK economy was “probably much faster and slightly weaker than other economies.”
To combat inflation, central banks have raised interest rates since December, the highest level since 2009. Further rises are becoming more uncertain as policymakers try to balance inflation control with the risk of a recession. Oxford Economics predicts that the UK economy will stagnate next year.
Johnson’s economic challenge was a proposal to “upgrade” the country with grand plans to reduce regional inequality. But for many analysts, the plan has leveled off due to lack of concreteness. His frequently stated willingness to build a “high wage, high skill, high productivity economy” was verbalized, but they said he was not a policy action.
“There are certainly some good slogans, but there is no big achievement behind them,” Goodwin said. “Many of these types of policies were ideas, and nothing followed. There was no delivery mechanism.”
One of Johnson’s most proud achievements was “achieving Brexit.”But like that In Ireland, the process continues to be involved in conflict. Mr Johnson’s Brexit heritage is uncertain due to the slow realization of the economic benefits of leaving the European Union.
For many industries, including farming, construction and hospitality, Brexit’s legacy is the smaller workforce that is driving the slowdown in business. For SMEs exporting to the European Union, Brexit has incurred additional costs and bureaucratic formalism, but with no recognizable benefits. Trade barriers are also exacerbating food inflation, according to economists.
“Technically, there is a world that has left the European Union, but it has not replaced the kind of trade agreements that may have promoted better growth than it would otherwise,” Chada said. “We aren’t really’Brexited’, as people said we did. “
