UK economic outlook has “seriously deteriorated”

International Business News  –  The International Monetary Fund (IMF) predicted in the latest World Economic Outlook Report that the UK’s economic growth will slow significantly in the second half of this year, and will become the weakest economy in the G7 next year. Growth forecasts for 3.2% and 0.5%, respectively. The Bank of England, the Bank of England, has warned that the outlook for the UK economy has “significantly deteriorated” and that the UK banking industry needs to prepare for a severe recession.

At present, the inflation level in the UK remains high, and food prices and fuel prices continue to rise. Data from the Office for National Statistics showed that the consumer price index rose 9.4% in June from a year earlier, hitting a 40-year high. Among them, gasoline prices rose by 42% year-on-year, and food prices rose by nearly 10%. Shortages of energy and raw materials have also pushed factory costs up 24% year-on-year, the largest increase since records began in 1985, and ex-factory prices rose 16.5%, the highest in more than 40 years.

Fish and chips are a century-old popular dish in the UK, but now the prices of the raw fish, potatoes, cooking oil and flour used to make the dish are rising. At a London shop called “Fish and Chips”, the price of a regular-sized fish and chips has risen from £9.50 in May to £11.75 now, compared with £7.95 a year ago. In just one year, the price of cod has risen by 75%, the price of sunflower oil has risen by 60%, and the price of flour has risen by 40%, according to Reuters. Crook, chairman of the British Fish and Chips Association, predicted that continued high inflation will lead to the closure of nearly half of the UK’s fish and chip shops in the future.

The high inflation rate increases the living burden of the people. The Bank of England predicts that real disposable income of British households will fall by 1.75% this year. According to a survey, about 16% of British households, or nearly 4.5 million households, are currently facing “serious financial difficulties”. Households in “severe financial hardship” have increased by nearly 60 per cent since October last year. According to the British “Times” report, as of the end of June, the UK’s largest pawnbroker, Harvey-Thompson pawnshop, had a record high demand for mortgage loans, 40% higher than before the outbreak, and the total loan amount increased by 75% year-on-year. A French Ipsos poll found that 45% of British adults believe inflation is one of the most troubling issues facing the country today, the highest level since the agency began surveying in the early 1980s.

A number of economic sentiment indices and confidence indices in the UK have continued to decline recently. In June, the purchasing managers’ indices for the manufacturing and service industries fell by 11.1% and 8.1% year-on-year, respectively. Data from market research firm Gfk showed that consumer confidence in June was negative 41, the lowest level in 48 years. A survey of British corporate treasurers by consulting firm Deloitte showed a 63 percent chance of a recession in the UK next year, with companies surveyed generally speeding up their reserves to prepare for more difficult conditions in the future.

The British “Guardian” pointed out that the government’s subsidy and tax rebate relief plans to cope with the surge in the cost of living of residents are far behind the speed of price increases. The article in the British “Weekly Report” believes that alleviating the increasingly serious labor shortage may be the “most urgent task” facing the British economy. Data show that compared with before the epidemic, the British labor market has decreased by nearly 900,000 people, and about 450,000 employed people over the age of 25 have withdrawn and it is difficult to return to the labor market. “Brexit” has also further weakened the attractiveness of the British market to the labor force of neighboring countries. Since 2019, nearly 200,000 EU citizens have lost their jobs in the UK. The Bank of England has previously warned that the imbalance between supply and demand in the labor market, coupled with high inflation, has pushed up labor costs and the risk of a price spiral.

Martin Wolf, chief economic commentator for the Financial Times, said the root cause of the UK’s current economic woes is the secular stagnation of productivity and real incomes. The British think tank “Resolution Foundation” recently issued a report warning that a long-term and coherent economic strategy is necessary to solve the “dilemma of low growth and uneven development”.

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