June 27, 2022

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The Very Preventable Economic Disaster Overtaking Britain

2 min read

The U.K. economy is the world’s fifth-largest and Europe’s second-largest after Germany. London is a major financial center, and Britain is an energy producer and a vigorous global trader. What happens here matters to the rest of the world. So it matters that the British economy today is, to put it delicately, a hot mess.

This week saw news of a second consecutive monthly economic contraction, of 0.3% in April following a decline of 0.1% in March. Inflation is running at 9% and so far has proved impervious to the Bank of England’s belated efforts to normalize monetary policy. A benchmark interest rate now up to 1.25% from 0.1% in December has yet to have a discernible impact.

Instead, as of last week it cost £100 ($121) to fill the tank of the average family car, and households, whose energy prices shot up 54% in April, are bracing for another 40% price rise when the regulatory price cap next comes up for review in October. Real wages fell 3.4% in April compared with a year prior, the steepest decline in two decades.

The Organization for Economic Cooperation and Development expects the U.K. to be the worst performer among major economies next year, with zero growth. British businesses and consumers have internalized the gloom, and confidence is falling. Oh, and the country is likely to be hit with its worst rail strike in 30 years later this month as unions resist layoffs in the face of falling passenger demand.

National economic sob stories are a depreciated dime a dozen these days, so it’s fair to ask what makes Britain’s so special. The answer is that the U.K. ought to be boasting the developed world’s brightest prospects right now rather than the worst.

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2022-06-16 13:16:00

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