Take a look at the UK economy and the outlook after coronavirus along with Brexit. The United Kingdom may be only two months away from the severe social crisis, writes Bloomberg. British households expect a sharp increase in living costs in the spring. At the same time, 66 percent of British adults already admit that their accounts have risen since the beginning of the year. All this at a time when Prime Minister Boris Johnson’s Conservative government is in danger of collapsing.
UK Economy Outlook for 2022
“British families are facing a catastrophic impact on their standard of living,” warns The Resolution Foundation, an independent think-tank. According to this institution, the average British household will pay £ 600 this year, about 17,500 crowns, more only on taxes and energy. The Center for Economics and Business Research in London estimates that the British will pay almost two thousand pounds a year for their total living costs, over 58 thousand crowns.
There are several reasons for this. The British government is set to significantly increase taxes from April 1 to the highest levels since 1955. Employees and employers pay 1.25 percent more on social and health insurance. Dividend tax will also increase by the same rate.
Why is inflation rising in the world?
To this must be added rising energy prices. They have to increase in price by up to half since the spring. The country’s inflation rate is at a 30-year high. It reached 5.4 percent in December, erasing the benefit of rising wages for most employees. At the end of last year, they grew at a rate of only 3.5 percent per year. “Wages can’t keep up with inflation,” Bloomberg economist Jonathan Boys of the Chartered Institute of Personnel and Development said.
And that’s not the end of it. Loans will also become more expensive for the British, as the central bank appears to be preparing to continue raising the key interest rate. The Bank of England increased it from 0.1 to 0.25 percent for the first time since the pandemic in December. However, according to analysts, it may move up to 0.5 percent next month.
Brexit doesn’t help either
In addition, the United Kingdom continues to struggle with the aftermath of Brexit. Many regions are still struggling with labor shortages and empty supermarket shelves. Since January, new rules have come into force that complicates the transport of goods between Britain and the European Union. In addition, researchers agree that the British economy would do better if the state remained part of the European single market.
Not to mention that Britain remains one of the most affected countries in the coronavirus pandemic. One hundred fifty-three thousand people died in connection with the covid-19. The daily increase in the number of positive people is currently around 90,000. British companies also reported the most significant sales decline since April 2020 due to a new mutation in the coronavirus omicron.
According to some media, British Finance Minister Rishi Sunak is already considering financial assistance for the poorest households. Some opposition politicians have also called on him to abolish the 5 percent value-added tax on fuel temporarily. However, Sunak rejects this solution.
“The abolition of VAT is a very inefficient tool. We will spend a lot of money on people who do not need it, and on the contrary, it will not help those who do much. And once we make the VAT cuts, it is tough to restore the original rate, “said Sunak.
United Kingdom and Boris Johnson
In addition, members of the government currently have entirely different concerns. The controversial Prime Minister Boris Johnson has to deal with the most severe case during his tenure as head of state. After reports of parties at his headquarters during the harshest pandemic closures, he lost public support and many deputies.
“In God’s name, leave,” Johnson David Davis, a prominent member of the Conservative Party and former Brexit negotiator, called Johnson at a meeting of the British Parliament this week. Although the prime minister has made it clear in recent days that he does not intend to resign, his premature end to the government is still possible.
It is enough for most of Johnson’s Conservative Party to agree and provoke a vote of no confidence in its chairman. It could theoretically happen in the coming days when the investigation results into the prime minister’s participation in the mentioned parties are to be published. However, it is currently unknown how many conservatives want Johnson’s resignation. If the current prime minister falls, one thing is for sure – his successor will not have easy work to do. Outlook for the UK economy isn’t looking bright, but it all can change in the future.