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

Britain has endured a lack of leadership for months, but the country has slipped toward a recession and a humanitarian crisis caused by soaring energy prices.

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.

“You just get hit after hit,” said Martin McTag, who heads the British Small Business Federation. “I’m sorry that I can’t find any good news for you.”

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.

The most pressing issue is dealing with skyrocketing energy costs. This could lead to a wave of business closures, forcing millions of people to choose between putting food on the table or heating their homes this winter.Experts warned people would become poor Without urgent action, the number of deaths in cold climates will increase.

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.

'Starve or freeze': Millions of older British people fear tough choices as costs skyrocket this winter

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.”

Mr Neame, whose portfolio includes about 300 pubs in the south of England, said business owners were panicking. If you can find a supplier, your annual utility bill will be ridiculously high. Greene King pubs Nick Mackenzie, the head of his chain, says that one of his locations partnered with the company has lower energy costs. Jumped 33,000 pounds ($38,167) per year.

“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

That’s not the only reason business owners and investors are getting worried. Job openings declined from May to July, Remaining 60% above pre-pandemic levelsFinding workers for vacant roles has been a particular challenge for the UK since the referendum decided to leave the European Union. There will be around 317,000 fewer EU citizens living in the UK in 2021 than there were in 2019, according to the report. National Statistics Office.
Information sheet posted outside London's Victoria Underground Station on August 19, advising the public on planned strike actions.
Brexit has also disrupted trade, especially with the UK’s largest trading partner, the EU.import and export about 15% lower In the long run, the Budget and Responsibility Office predicts that it will be better than it would have been had the UK remained in the EU.
UBS UK economist Dean Turner said it was up to the new prime minister to try to make the most of the country’s status without further turmoil.But hardline MPs in the UK still throw away It’s a key part of the Brexit deal Johnson signed with the European Union, which could ultimately spark a trade war with Britain’s biggest export market.

“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

who is truss expected to take the reins After a series of scandals toppled his government earlier this summer, Mr Johnson vowed to revive the economy through tax cuts. I am afraid that it will hurt people and keep money out of the pockets of those who need it most.

“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.

There’s no way the state can avoid paying huge sums to deal with this winter’s energy situation, but targeted measures will be needed to avoid waste.Next he freezes gas and electricity prices for two winters, government could suffer Over £100 billion ($116 billion), according to researchers at the Government Institute.

“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.”

Foreign Secretary Liz Truss and candidates for Conservative leadership address in Birmingham, UK, 23 August.

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.

British government large amount of debt Providing support during the coronavirus lockdown.The national debt is now mostly 100% of gross domestic productWhen interest rates were rock bottom and access to cash was cheap, this wasn’t a big deal.

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.”


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