The UK’s economy is under threat
There’s no doubt that the economic downturn has made the UK economy seem bleak for the long-term future, particularly with a recent report from the Office for Budget Responsibility (OBR) revealing that Brexit will reduce long-term GDP by around 4%.
Of course, Brexit isn’t the only factor comprising the near and long-term performance of the UK economy, as a number of other issues combine to create a perfect economic downturn storm.
We’ll explore these various factors below while asking how the UK can get back on track in the future.
Addressing the key factors compromising the UK economy
Some of the factors impacting the UK have been widely reported, with analyst Craig Erlam from the forex trading platform Oanda suggesting that “an end to the government’s furlough scheme and universal credit top-up, combined with a bizarre fuel crisis due to drive shortages” are having a direct impact on the markets.
So, let’s take a look at some of these factors in more detail and appraise what the future holds for the UK.
- The energy crisis and driver shortage: In the wake of Covid-19, we’re seeing the demand for energy and natural gas soar as countries look to sustain their recovery, with this exacerbating global supply chain issues to create sky-high oil and gas prices for consumers. A shortage of qualified HGV drivers (as a result of both Covid and Brexit) is also exacerbating the issue, by making distribution difficult and increasing the price of petrol at the pump).
- The end of the furlough scheme: The furlough scheme ended on September 30th, at which point it was estimated that around one million workers were still having their wages subsidised by the government. With this financial assistance having now been removed, it’s thought that unemployment rates could soar while households nationwide will see their monthly finances hit in the build-up to Christmas (lowering consumer spending and confidence in the process).
- Post-pandemic decline: While Brexit will ultimately impact UK GDP by 4%, Covid’s effects will remove around 2% from our gross domestic product. Currently, some companies are only seeing 40% of the trade volumes that they recorded prior to the pandemic, while this trend is expected to continue in the near term. In this respect, there’s no doubt that Brexit and Covid-19 are combining to negative effects, creating a huge issue in terms of economic and GDP growth.
The last word
Ultimately, both the short and long-term economic outlook in the UK appears bleak, particularly as a number of factors combine to impact negatively on the economy.
Some of these are likely to persist for a while too, with Brexit and the fallout from the pandemic likely to be particularly challenging over time.
However, there may be some relief as the supply chain crisis begins to ease in the wake of the pandemic, while the hope remains that gas prices may also stabilise early in 2022.