British Prime Minister: Boris Johnson is about to hand his successor an economic ‘catastrophe’

Since Boris Johnson announced he would left in July, growth prospects are weakening.The annual inflation rate is More than 10 Food and fuel prices are skyrocketing.Frustration over rising cost of living forces hundreds of thousands of workers to work in ports, trains and mailrooms go on strikeThe British pound hit its worst month since the aftermath of the 2016 Brexit referendum, hitting its lowest level against the US dollar in more than two years.

Before things get better, they can get worse. The Bank of England expects inflation to jump to 13% as the energy crisis intensifies.Citigroup estimates UK inflation May peak at 18% Meanwhile, Goldman Sachs has warned that if natural gas prices “remain elevated at current levels,” they could reach 22%.

Johnson’s potential successors, current Foreign Secretary Liz Truss and former Finance Minister Rishi Sunak, are called upon to announce dramatic intervention as soon as possible. of which He is the fourth Conservative Party leader in ten years.

Jonathan Neame, who runs Shepherd Neame, Britain’s oldest beer company, said: “Everybody is assuming there will be a quick and decisive announcement that will solve the problem, or at least put people at ease. “Otherwise, the person would be under a lot of pressure.”

Energy ‘catastrophe’

Household energy bills will rise by 80% from October to average £3,549 ($4,106) per year.According to analysts, the household price cap is It climbed to over £5,000 ($5,785) in January and over £6,000 ($6,942) in April.

The post-coronavirus lockdown consumption boom is rapidly cooling down as people are forced to reassess their budgets. The Bank of England has warned that the UK economy could slip into recession in the coming months.

“The main challenge posed by skyrocketing energy prices is that large energy households, especially poor households, will have a really hard time making ends meet,” said Ben Zaranko, senior research economist at the Institute for Public Finance Research. said Mr. “That would mean significant cuts in other areas of spending.”

“It’s really difficult for many businesses, especially those that have experienced Covid in a weakened state,” McTague said. “They are now struggling to cope with the catastrophe of a lifetime. .”

A collapsing British pound will exacerbate the problem, raising the cost of importing energy and other commodities, which could push inflation even higher.

overlapping crises

“Brexit happened. That’s the reality. We all have our own opinions about it,” Turner said. “But we have to work on it to get better. I’m struggling to see if we have the momentum to do that.”

there is no easy solution

“Benefits of cutting [taxes] “It’s going to go to those who pay more taxes—those who generally have more money,” said Jonathan Marshall, senior economist at the Resolution Foundation.

“Energy is expensive, gas is expensive,” said Marshall. “It needs to be paid for so people don’t freeze at home, but the country doesn’t have to pay for it for those who can afford it.”

There are also questions about how the next government will carry out large-scale economic interventions. Especially when reducing taxes and thus reducing government revenues is a priority.

But that is no longer the case. The Bank of England is aggressively raising interest rates to curb inflation. This makes it more and more expensive for the government to service the debt. The UK has also issued a number of inflation-protected bonds, adding to its vulnerability.

IFS’ Zaranko said, “This is a near-perfect patchwork of challenges that makes finances look at risk in a way not seen these days.”