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THE UK ECONOMY FACES LONG-DUE ECONOMIC CHALLENGES OF EXITING THE EUROPEAN UNION

Harvest Global Markets :

The UK economy is performing far worse than its continental peers as commentators suggest that it is paying the economic cost of departing from the EU and is further hard-pressed by the Covid hit. It experiences accelerated inflation, acute energy crises, and an increasing debt pile more aggressively when its fellow G10 (Group of 10) members experienced the same supply shocks.

Beyond the concerns associated with the crisis in Russia and Ukraine on a global and regional scale, the continued volatility in the pound’s exchange rate and the gilt market has exacerbated the general economic circumstances and created more difficult financing conditions.

The Bank of England is seen to continue raising the interest rates from the current 2.25% to 3.25% by February 2023, to cool down the economy and return inflation toward its 2% target in the medium term. The latest release from the Office for National Statistics UK, confirms the inflation for September 2022 to reach a double-digit value of 10.1% hitting a 40-year high.

Although, Europe also faces a difficult and uncertain geopolitical and economic outlook as Russia’s political risk appetite appears to increase after the losses of territory in Ukraine and withstands the unwarranted energy prices inflation. Furthermore, triggering government interventions to support consumers and businesses and central banks altering interest levels rapidly. Many people in Europe believe that the UK-EU divide dents the region at a time when other nations, most notably China and Russia, are becoming more aggressive and the United States has withdrawn inward as well.

By ending the free movement of EU migrant workers to the UK, the UK government has unilaterally cut the labor supply and its elasticity. By adding new tariffs and non-tariff trade barriers, the British government has slashed purchasing power and available imports, and it has created inflation during the staggered implementation of the Brexit deal.

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