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The End Of Britain! The Real Reason Why Britain Is Collapsing, Europe Should Be Worried #economy #trade #market If we go back a few months, there was a global concern that Britain was standing out in an unusual way. In May, core inflation was inching close to 7%, a whopping 2 points higher than both the euro area and the US at that time. Adding to the worry, it seemed like price pressures were gaining momentum while the economy was still grappling with challenges. The GDP was below its pre-pandemic level, and Britain's recovery was trailing behind other developed nations. At first glance, it appeared as if Britain was stuck with persistently higher inflation. Brexit and supply shocks, including a decline in labor participation, were pointed to as culprits. Some even questioned the credibility of the Bank of England, and financial markets, at one point, anticipated a substantial policy rate hike to 6.5%—a far cry from what the United States and Europe were contemplating. Britain seemed to be the exception. If You Like This Video; Like, Share, Comment And Subscribe. This Means A Lot To Us! Thanks For Watching Our Video: The End Of Britain! The Real Reason Why Britain Is Collapsing, Europe Should Be Worried However, digging deeper revealed that smaller economies, like Britain, often face more significant challenges from external shocks, experiencing more fluctuations in inflation compared to larger ones like the US. Interestingly, other small open economies, such as Sweden, Australia, and Norway, were also grappling with similarly high inflation rates. While Brexit may have nudged consumer prices, it was likely a one-time adjustment rather than an ongoing inflation issue. The timing of the post-pandemic reopening also played a role, with the Britain easing restrictions later than the US, explaining the similar pattern in inflation. Intriguingly, the cumulative rise in core prices since the start of the pandemic was identical in both countries. Shifting gears, one major factor contributing to these economic dynamics is inequality. According to the Resolution Foundation's report titled “Ending Stagnation,“ inequality in British society significantly influences concerning statistics about lost income for workers and households. In fact, it's much higher than in any other “large European country.“ The report highlights eye-opening productivity gaps, such as the difference in productivity between the leading city and other large counterparts in the UK being more significant compared to peer countries like France. This persistent inequality, coupled with sluggish growth, has taken a toll on low- and middle-income Brits. They are now 20% less well off than their German counterparts. Despite recent GDP growth figures showing the UK doing better than Germany in 2023, the struggle to boost growth traces back to the aftermath of the global financial crisis in 2008. Adding another layer to the puzzle is underinvestment. Public sector investment, crucial for the economy's foundation, has been low for quite a while, with tight fiscal rules not providing sustained financing to key areas. Surprisingly, the private sector is also grappling with challenges due to political and economic instability in recent years. The report emphasizes a noteworthy point: if UK business investment had matched the average of France, Germany, and the US since 2008, GDP would be nearly 4% higher today, translating to an extra £1,250 a year in wages. Food for thought, indeed. Turning our attention to inflation trends and their impact on citizens, the rising costs affect the standard of living and wages. British workers are losing out on £10,700 every year due to over a decade of sluggish economic growth and significant inequality. The Resolution Foundation's report calls for a prompt reassessment of the economic strategy after enduring 15 years of relative decline. Breaking it down, there's a living standards gap of £8,300 between typical British households and their counterparts in Australia, Canada, France, Germany, and the Netherlands. The report attributes this to a “toxic combination“ of low growth and high inequality. Shockingly, 9 million younger adults have never experienced an economy with consistently rising average wages. Examining the UK's economic trajectory, the report reveals that the UK was keeping up with more productive countries like France and Germany in the '90s and early 2000s. However, things took a turn for the worse in the mid-2000s, and the country is still trying to bounce back. Labor productivity only grew by 0.4% a year in the 12 years after the financial crisis, half the rate of the 25 richest OECD countries. The productivity gap between the UK and France, Germany, and the US doubled since 2008, reaching 18%, costing about £3,400 in lost output per person. More Details In The Video
