British consumers are feeling the pinch. Prices of commodities are rising and their wages are struggling to keep up. If they feel that there’s no end in sight, they might be right.
The International Monetary Fund projected that the UK's economy will decline this year. But other major economies will grow.
The Bank of England also made a similar forecast. It predicts that a recession is on the UK’s cards this 2023. But they amended it and said it will be shorter and less serious than what they first predicted.
News of a struggling economy isn’t surprising. After all, the entire world is still reeling from the pandemic. There’s also Russia’s invasion of Ukraine and the surging food and energy costs.
It’s surprising that the UK appears to be doing worse than other European countries, like Germany. But is the UK falling behind its neighbors?
The forecasts made by the IMF and other economists are not infallible. There are many factors that impact a country’s economy. But these conjectures do have a grain of truth based on evidence. And it points out that the UK has faced harsher and bigger challenges than its EU counterparts.
OECD data showed the UK's economy falling further than other countries post-pandemic. The country recovered quite fast when the economy opened though. But it wasn’t fast enough to compensate for the months of lockdowns.
There are other issues that could explain the UK’s less-than-stellar economic performance. A big reason is Brexit. There are varying reports on how much Brexit is costing the country. Bloomberg estimates it’s costing Britain’s economy about £100 billion per year. But the economy is 4% smaller now than what it could’ve been if it remained in the EU.
Investments in the UK have also stalled since Brexit. One policymaker said the UK took a £29 billion hit because of it. It's compounded by the limitations the move has put on EU workers. They have a harder time working in the UK now. This has caused staffing problems in sectors like agriculture and hospitality.
Russia's ongoing attempt to invade Ukraine is also affecting the UK economy. It has caused global energy prices to skyrocket. The UK is struggling more than others because it has fewer options. Other European countries have alternative sources of energy. For instance, Norway has a robust hydropower infrastructure.
Workforce shortages are also taking their toll on the UK. The pandemic saw the workforce of almost every country shrinking. But some countries have already bounced back. The UK hasn’t and economists are all baffled on why.