There are warnings that Britain is facing the worst recession among developed economies.

(AFP file photo)

Massive strikes shut down the economy

[Financial Channel/Comprehensive Report] Britain's economic crisis has deepened again this year due to strikes by railway workers. decline.

From railways to healthcare, the strikes have added to pressure on an economy hampered by labor shortages and high inflation.

According to a survey of analysts by the British media "Financial Times", the UK may suffer the longest and deepest economic growth decline among advanced economies in 2023.

Tony Danker, chairman of the Confederation of British Industry (CBI), previously stated that the UK is in the midst of stagflation, with soaring inflation, negative economic growth, and falling productivity and business investment.

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According to data released by S&P Global at the beginning of the month, manufacturing activity in the UK fell to the lowest in nearly 31 months in December, and the manufacturing PMI (Purchasing Managers Index) further fell from 46.5 in November to 43.5, continuing to fall below the 50th level. Below the dry line, the survey found that the British manufacturing industry will end with weak performance in 2022, with business output, new orders and employment rates declining at an accelerated rate across the board, while prices continue to rise.

Many analysts expect Britain's flagging economy to persist as the Bank of England (BOE) keeps interest rates high to fight inflation.

(European News Agency)

High energy bills set UK economy to shrink by 0.9% this year

Many analysts expect the flagging economy to persist as the Bank of England (BOE), the Bank of England, keeps interest rates high to fight inflation.

Analysts at Allianz forecast the UK economy will shrink by 0.9% this year, hit mainly by rising energy bills, high interest rates and an increase in business failures.

It also warned that businesses in the UK and Europe would suffer a "huge profit hit" from rising energy bills in the coming months, which would not be fully offset by government support measures.

Allianz predicts the number of UK business insolvencies will rise by 15% to 27,100 in 2023 as businesses are overwhelmed under the weight of rising costs.

Consumer confidence has also dipped below 2008 lows, adding to the economic disaster, with British consumers facing skyrocketing electricity bills due to the country's reliance on natural gas and a lack of energy storage.

Bank of England chief economist Peel (Huw Pill) recently warned that compared with other developed countries, Britain faces a more serious threat of persistent high inflation, indicating that interest rates may remain at a higher level for a longer period of time.

Peel noted that the BoE initially had to deal with soaring gas prices, but the risk of persistently high inflation was exacerbated by low unemployment, Brits leaving the job market and businesses finding it easier to raise the cost of their products.

The think-tank Brexit has shrunk the UK economy by a further 5.5% than originally expected and exacerbated the squeeze on public services.

(Reuters file photo)

Brexit hits UK economy hard

It has been two years since the United Kingdom officially left the European Union on December 30, 2020, under the leadership of former Prime Minister Boris Johnson, who said at the time that the Withdrawal Agreement would allow British companies to do more business with the EU , and give the UK the freedom to strike trade deals around the world while continuing to export to the EU market of 450 million consumers.

But in fact, Brexit has hindered the British economy in a large part. The uncertainty of future trade relations has damaged business investment for many years. Although the UK has signed a trade agreement with the EU for 2 years, business investment in Q3 2022 Still 8% below pre-pandemic levels.

The British pound has been hit hard, making imports more expensive while failing to boost exports, and Brexit has erected trade barriers for British companies and foreign companies based in the UK as a European stronghold, weighing on imports and exports, undermining investment and causing labor shortages. These factors have exacerbated Britain's inflation problem, hurting labor and the business community.

The latest report released by the Center for European Reform (CER), a think tank, shows that Brexit has caused the British economy to shrink by 5.5% more than originally expected, and has exacerbated the austerity of public services.

The Center for European Reform pointed out that the slowdown in growth was also putting pressure on the Treasury's revenues, and that there would be no need to announce tax increases in the autumn fiscal statement if the UK remained in the EU common market.

The findings underscore the cost of Brexit, limiting Prime Minister Rishi Sunak's efforts to steer Britain's economy out of recession ahead of the next election.

John Springford, deputy director of the CER, said in the report that the shock of Brexit will inevitably lead to tax increases, because slower economic growth will require higher taxes to fund public services and benefits.

The CER report pointed out that leaving the EU single market will lead to an 11% reduction in investment, a 7% reduction in merchandise trade, and an annual economic loss of 40 billion pounds (about NT$14.7 trillion) in taxes in the 18 months to Q2 2022, which will be enough to pay Three-quarters of the tax hikes and spending cuts announced by Chancellor of the Exchequer Jeremy Hunt in November last year.

This has caused the UK to lag behind every other major economy as countries recover one after another.

From railways to healthcare, the strikes have added to pressure on an economy hampered by labor shortages and high inflation.

(Bloomberg)

Inflation, high interest rates crush UK

In its outlook for 2023, Goldman Sachs predicts that the UK’s real GDP will shrink by 1.2% this year, far below other major economies. It is one of the most pessimistic forecasts. Shocking Russia.

The UK economy is expected to grow by 0.9% in 2024.

According to the market consensus, the UK economy is expected to shrink by 0.5% in 2023 and resume expansion in 2024 with a growth rate of 1.1%. The Organization for Economic Cooperation and Development (OECD) also predicts that the UK will lag far behind other countries.

Goldman Sachs chief economist Jan Hatzius and his team believe that both the euro zone and the UK are already in recession because they have both experienced larger and longer-lasting increases in household energy bills, which will push inflation to . A higher place than expected.

The Goldman Sachs team pointed out that high inflation is bound to put pressure on real income, consumption and industrial production. It is expected that real income in the euro zone will further decline by 1.5% by Q1 2023, and by 3% in the UK by Q2 2023, and then in the next quarter. half year recovery.

Consultancy KPMG expects UK real GDP to contract by 1.3% in 2023 in a relatively shallow but prolonged recession, before a partial recovery of 0.2% in 2024.

Tighter incomes are cited as the main driver, with soaring food and energy prices, headline inflation and rising interest rates significantly eroding household purchasing power.

Anhou economists also mentioned in an outlook report in December that the labor market is expected to deteriorate from the first half of 2023, and the unemployment rate will reach 5.6% by mid-2024, representing an increase of about 680,000 people.

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