Thu, 07 Jul 22 12:12:06 +0000

Boris Johnson leaves financial turmoil for successors to fix

But his popularity outside parliament could lead to a surge in inflation and stagnation in the UK economy, which could put millions of people in poverty. I'm terribly depressed by the crisis of living expenses. Risk of damaging winter and trade wars with the European Union.

UK stocks rose, sterling rose 0.75% to trade at $ 1.20 following reports of Johnson preparing to fall, just below its two-year low earlier this week. I recovered to.

"But undoubtedly, the [pound] remains terribly weak due to the dire state of the UK economy, which is below its peers, and [and] to deal with rising inflation by the Bank of England. Will actively raise interest rates. "

As the new leader of the Conservative Party and the countryAnyone who emerges from the rubble of the administration faces a series of extraordinary economic and financial challenges.

The UK boasts the highest inflation rate in the G7.

All major economies are suffering from the protracted impact of the pandemic on the supply chain and the shock of energy and food costs from Russia's invasion of Ukraine in February.

But Britain is inferior to most other peers. Inflation reached a 40-year high of 9.1% in May, withbeing the highest of the G7's major economiesand projected to exceed 11% later this year.

Brexit's knock-on effect — the result of Johnson's government signature — exacerbated a serious labor shortage and increasedcorporate operating costsImport costs also surged At the value of this year's pound, which has risen due to a downturn. The rise in food and fuel pricesin

poses the worst cost of living crisis in decades, with low-income households choosing between heating and eating. I was forced to do it. Anti-poverty activists as they demand more government support.

The Johnson administration has promised a £ 400 ($ 502) subsidy per family to help millions of people struggling to pay for energy. He also succumbed to pressure last month and announced a £ 5 billion ($ 6.3 billion) tax on the plunge profits of oil and gas companies.

But those efforts have been swallowed. According to the Bank of England, disposable income has been on track for the second-largest decline since the record began in 1964, driven by soaring energy and food prices. And those bills are getting worse.

Average annual household energy prices could increase by about 50% to £ 3,000 ($ 3,600) this winter when the maximum price limit that suppliers can charge customers is revised in the fall. There is sex. Regulators have already raised the cap by 54% in April.

UK households are particularly exposed to a sustained decline in living standards. The Resolution Foundation said on Monday that typical wages are not higher today than they were before the 2008 financial crisis.

"The recent poor record of living standards in the UK, especially the complete collapse of income growth in poor households over the last two decades, needs to improve within the next decade," said the Foundation's chief economist. Adam Collet says. ..

And we are heading for the lowest growth.

Without strong growth, the wage slump will not reverse. And that's unlikely right away. Around the world, the once strong recovery has been reduced. However, the UK is in a particularly bad situation, especially in the looming recession.

The world's fifth-largest economy stopped in February and began to shrink in March. According to the National Bureau of Statistics, the decline accelerated in April, when GDP is estimated to have declined by 0.3%, and all three major sectors of the economy (services, manufacturing and construction) have receded. May retail sales fell for the second straight month.

There is even worse news. In a report on financial stability released earlier this week, the Bank of England said the outlook for the UK economy had "significantly deteriorated."

Last month, the Paris-based Organization for Economic Co-operation and Development predicted that the UK economy was heading for stagnation and GDP growth in 2023 would be zero. This will be the worst performance of the G7 next year. ..

While Brexit wasn't delivered,

Johnson succeeded, and his predecessor Theresa May failed by "running Brexit." However, the breakup with the European Uniondid not bring the trade boostpromised by him and other Brexit supporters.

The UK has missed much of the recovery in world trade since the pandemic, the government's own fiscal oversight agency, the Budget Responsibility Department, ended in March.

For many companies, the tariff-free trade agreement that Johnson signed with EU leaders within two yearssignificantly increased customs paperwork, and they said they Making it difficult to sell to. Largest export market and increased import costs. And transactions signed with other countries hardly move the needle.

"Additional trade with other counties may offset some of the decline in trade with the EU, but any agreements signed so far are in our expectations. It's not big enough to have a significant impact, "OBR said. ..

According to official data released last week, the UK's balance of payments deficit surged to 8.3% of GDP in the first quarter of 2022. In short, the UK needs to rely more on foreign investment than ever to make up for this fact. The country imports far more than it exports.

Against this background, the pound was hit this year, but was not helped by the threat of destroying part of the Brexit Treaty signed by Johnson. This has led to stories of retaliation that couldpoison the relationship with EU leadersand escalate to the trade war, which is most likely to hurt Britain.

"Judging from the initial lineup of potential successors to Johnson, the balance of potential outcomes will lean towards a less tense relationship with the EU," said Berenberg's Karm Pickering.

"Even enthusiastic Brexiteer candidates have less populist diversity than Johnson, although it is unclear if the relationship between the UK and the EU will improve slightly or significantly. , Suggesting that the overall situation is considerable. Calm down. "