Last year the Bank of England declared the English nation would go into a long-term recession due to inflation which is a result of the increased interest rates in the market leading to an economic shock.
This all began in September 2021 when there started to panic ‘buying of fuels’ with an expected fuel shortage in the backdrop of the global health and security crisis. There were speculations about increasing unemployment along with the cost of living rising.
Several reasons for a failing English economy are-
BREXIT– Britain’s exit from the European Union affected its demography tremendously. Trade barriers and labour shortages impacted the economy which shot off prices in the market. Big multinational countries withdrew their assets from the country. Foreign Direct Investments saw a great slowdown.
COVID- The pandemic was yet another blow to the whole world itself, that shook the global supply chains. Overall GDP fell.
Russia-Ukraine war: Putting up sanctions against Russia only created more problems for itself by cutting off gas supplies. Electricity prices rose to unexpected levels. Being a NATO member, it also had to come to the rescue of Ukraine by supplying defence equipment as aid.
Weak Political Leadership: Boris Johnson had to resign owing to several sanctions. The two most criticised were the ‘Partygate’ scandal, which saw leaders violating COVID-19 lockdown rules, and, the promotion of Conservative party member Chris Pincher to Deputy Chief Whip, who had sexual assault allegations against him.
Liz Truss, who took over the premiership after Johnson, entered the picture with the ‘Mini Budget’ that eventually led to the rapid downfall of the already damaged economy. To correct the existing wrongs in the economy, Truss brought in several policies and tax cuts like the 45% tax cuts on corporations, cap on energy prices etc. which were reversed as quickly as they were implemented. The tax cuts injected more money into an economy already doomed under inflation. With a poorly thought out plan and execution, the UK currency crashed (coming down to a valuation of $1.03) giving a giant rise to the cost of borrowings and inflation.
Truss also found herself under a lot of questions for sacking her ministers. This generated a lot of chaos in the country along with the death of Queen Elizabeth II, as Truss lost support from her own Conservative Party MPs, and had to resign. After 45 days of taking over the office, she became the shortest-serving PM ever in England.
There now lies huge challenges, both political and economic, in front of PM Rishi Sunak, former Chancellor of the Exchequer. It is now about looking at much bigger and broader macroeconomic solutions to take the UK out of its misery.
By Monica Gogoi – Writer has a Master’s degree in Political Science and Works in the Civil Society Organization