UK economy faces worst year of growth

Bank of England: UK economy faces worst years of growth

The British economy will face its worst years of growth since the Great Depression of the 1930s, the Bank of England (BOE) has warned.

The UK is facing its worst year of growth since the Great Depression of 1938. Source: Data compiled by Bloomberg from the UK Office of Statistics (ONS) and the Bank of England (BOE)
The UK faces its worst years of growth since the Great Depression of the 1930s. Source: Data compiled by Bloomberg from the UK Statistics Authority (ONS) and Bank British Central Bank (BOE)

Growth not exceeding 0.7%/year

Background economy Britain is in recession and its workforce is shrinking, meaning the economy has little room to pick up speed once the recession is over.

Experts from the independent think tank the Resolution Foundation (London) say the UK is in the midst of its worst growth period in 20 years since the Great Depression in 1938, if the Bank’s forecasts Central England is correct.

The Bank of England says the UK economy could grow no more than 0.7% a year – a quarter of the growth rate in the decade before the crisis. finance 2008. Productivity growth has been “sickly” since the crisis, while the Bank of England sees little chance of it improving in the medium term.

A major event on the UK labor market is the fact that hundreds of thousands of workers have left the market since the Covid-19 pandemic appeared, especially older workers. The reason why many workers leave the market is due to the prolonged fatigue of the epidemic and they may not even return to the labor market, according to the Bank of England.

Shorter and shallower recession

Contrary to historical developments, the recession that the Bank of England warned was at a shallow level. The agency’s forecast is that UK economic output will contract by less than 1% for five quarters, while the recessions of 1980 and 2008 did not last, but each recession caused an average damage. about 5% of GDP.

Instead of recovering in 2024, the Bank of England forecasts the economy in early 2026 will remain in a stagnation at a milder rate than before the Covid-19 pandemic and the number of unemployed people will increase by 500,000.

It’s bad news for Prime Minister Rishi Sunak as his Conservatives have fallen far behind the opposition Labor party in recent opinion polls. Fixing the structural problems plaguing the UK economy will take more time, not the two remaining years before a general election is held.

The Bank of England’s forecast is considered to be more pessimistic than the International Monetary Fund (IMF). Early last week, the International Monetary Fund warned the UK economy would face its worst two years of any major industrialized nation, including Russia, which has been hit hard by sanctions. of the West. The International Monetary Fund’s forecast for the UK economy’s growth in 2024 is slightly higher than in 2022.

For Brexit, the Bank of England has always assumed that the country will have to pay an economic price when it leaves the European Union (EU). And the damage from Brexit will come sooner than expected.

British business investment is expected to continue to decline and the latest analysis by the UK Central Bank shows that trade with the EU has declined more than official figures.

Post-Brexit, trade barriers were established since January 2021, UK trade turnover has decreased by 7%, according to official data. However, the Bank of England thinks that the reduction will approach 14% after the adjustment regulations for data issues, such as customs declarations, are implemented.

Speaking at a press conference last week, Bank of England Deputy Governor Ben Broadbent said: “We haven’t changed our assessment of the long-term impacts, but we have improved a few things. among them”. “We think maybe they (the impacts – BTV) will happen faster than we initially expected,” the Bank of England representative added.

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