First Brexit, then Covid-19. And then the war and inflation. The British economy is struggling and the governor of the Bank of England (BoE) does not mince words to describe a crisis which, without a turnaround, could lead to stagflation or even a full-blown recession.
Speaking above all of food prices, the number one of the BoE, Andrew Bailey, uses the adjective “apocalyptic” to describe the scenario, while the Economy Minister, Rishi Sunak, admits that "one cannot pretend" that Downing Street is able to find short-term solutions capable of alleviating the British crisis.
How is the British economy doing?
Brexit, whatever its supporters say, dealt a huge blow to the British economy and, while the island was still trying to contain its effects, Covid-19 arrived first and then the war in Ukraine.
UK macroeconomic data speak for themselves. The latest arrived yesterday: the PMI index processed by Markit it fell in May to 54,6 from 55,8 points in April. The index of the services sector, also in May, collapsed to 51,8, from 58,9 points in April, to its lowest level in the last 15 months. The composite index also fell sharply, reaching 51,8 from 58,2 points the previous month. At the basis of the declines, explains Markit, there is the worsening of expectations due to the sharp rise in inflation in May.
And again, according to a survey carried out by the Gfk company, in the current month British consumer confidence has taken a nosedive, dropping to its lowest level on record, -40 points. This is even lower than the 2008 subprime crisis, when consumer confidence fell to -39.
Inflation at a 40-year high in the UK
What worries economists the most is, however the trend of inflation. According to the British National Institute of Statistics, consumer prices rose by 9% in April against +7% in March. Once again it is a record: it is indeed the largest increase recorded in the last 40 yearsi, since Margaret Thatcher was in government, so to speak. This was caused by soaring energy, food and transport prices.
In detail, the price of food products last month it climbed 6%, hitting a 10-year high. An increase caused in large part by the obstacles to trade triggered by Brexit which have become even more serious with the war in Ukraine, leading Bailey to speak of an "apocalyptic" scenario.
It's even worse on the energy front. Following the UK regulator's decision to lift the cap on gas and electricity prices, the cost of bills rose by 54% in April, while according to government forecasts real incomes in 2022 will suffer the steepest contraction ever recorded. Meanwhile, since the beginning of the year the pound has lost 8% and in March the GDP fell by 0,1%.
Gloomy forecasts for the next few months
According to forecasts, bill costs will undergo a further 40% increase in October, while, according to estimates by the Bank of England, in autumn inflation will exceed 10%, accelerating to the fastest pace of the G7.
"There is no measure that any government can take that will make global forces disappear overnight," said Treasury Minister Rishi Sunak, heralding even tougher times ahead for The UK.
In fact, these are problems common to many European countries, exacerbated by a war that could lead to even more serious consequences in the coming months. The problem, in this case, is that while the other States of the Union have the possibility of supporting each other and of taking common initiatives against the cost of living, the isolation that the UK inflicted on itself with Brexit it risks becoming yet another obstacle to the British recovery, condemning it to a stagflation or, worse, a recession, from which it could be difficult to recover.
