What has been the reduction in production in important sectors of the UK economy?
What are the reasons for the worsening economic conditions in the UK in recent months?
What causes the sharp decline in the UK’s production and demand for goods and services?
What are the provisions of the new economic decisions of the UK government?
Economic output in the UK has fallen to its lowest level since the nationwide lockdown that shut down parts of the country’s economy during the Covid-19 pandemic, data from Lloyds Bank shows. The sharp decline in production and demand for goods and services in the UK is worrying.
Reduction of production in essential sectors of the UK economy
Economic experts have warned about a sharp decline in the UK’s production and demand for goods and services. In October, key sectors of the UK economy saw a sharp drop in output and demand for goods and services. 12 industries out of 14 manufacturing, service and construction sectors of this country experienced a decrease in production last month, while in September, nine sectors saw a decline in their production. The data showed that the number of industries recorded a drop in new orders was the highest since the first lockdown in May 2020.
Deterioration of economic conditions in recent months
The sharp decline in production and demand for goods and services in the UK shows the deterioration of the country’s economic conditions in recent months. The chemical production sector had the weakest performance with an index of 29.5 units, where a figure above 50 indicates the expansion of production. After that, the metals and mines sector experienced the lowest production growth with 31.1 units and household products with 38.4 units. Since July, more than half of UK sectors monitored by Lloyds Bank have reported consistently falling output and demand, suggesting economic conditions have worsened in recent months.
The continued recession of the UK economy
A sharp decline in production and demand for goods and services in the UK indicates that the UK economy is in recession. Jeavon Lolay, Head of Economics and Market Insight at Lloyds Bank, said: “The indications from our report suggest that the UK economy may already be in recession. With our domestic challenges and global headwinds unlikely to materially recede in the short term, the key question revolves around how long this downturn may last.”
The causes of the decline in the production of the UK economy
The sharp decline in production and demand for goods and services in the UK has various causes. The chemicals, metals and mining, consumer goods and banks sectors also saw a decrease in the number of employees in October, which is the highest since February 2021. Analysts say that skyrocketing inflation is the cause of this decline and has forced businesses and consumers to cut costs and invest in coping with rising costs.
A new plan to deal with the economic storm
The sharp decline in production and demand for goods and services in the UK forced the UK government to look for a solution. The finance minister announced that the UK is officially in recession, unveiling a new plan to deal with the economic “storm”.
The provisions of the new economic decisions of the UK government
A recession is a decrease in economic activity in which a country’s GDP decreases for two consecutive seasons. As a result, the national budget typically receives less tax revenue because businesses earn less, wages fall, and unemployment rises. Hunt announced a series of “difficult decisions” in his autumn statement to the British parliament, including about 30 billion pounds ($35 billion) in spending cuts and 25 billion pounds ($29 billion) in tax increases.
Increase in taxes on the UK energy industry
A six-year freeze on the income tax threshold and a cut in the top income tax rate by £125,000 ($147,000) have also been among his measures. According to Hunt, the UK energy industry is facing an increase in income tax as part of his new budget plan, with the sector’s tax rate rising from 25% to 35%.
Trying to get the UK out of recession
His fiscal measures also include a 10 percent increase in pensions, benefits and state tax credits and raising the minimum wage from £9.50 ($11.21) an hour for those aged 23 and over. The Office for Budget Responsibility (OBR) has assessed that the UK, like other countries, is now in recession, Hunt told MPs.
Inflation reduction in the plans of the new UK government
It said higher energy prices were the most significant cause of the downward revision in overall growth from March. The Office for Budget Responsibility confirms that because of our programs, the recession has become shallower, and inflation has decreased, Hunt said. Unemployment has also fallen, and about 70,000 jobs have been protected due to our decisions today.
The alarming situation of the London Stock Exchange
Bloomberg announced in a report that London is no longer the host of Europe’s largest stock market, and Paris has taken over this market. The network pointed to the strong performance of French luxury brands such as Louis Vuitton and Gucci and predicted that Chinese shoppers would be eager to spend as pandemic restrictions eased. Citing research data, Bloomberg reported that the French stock market is now worth $2.823 trillion, compared with $2.821 trillion in the UK.
The impact of Brexit on the London Stock Exchange
This is even though in 2016, when the UK voted to leave the EU in the Brexit referendum, the value of the British stock market was 1.5 trillion dollars more than that of France. Former Bank of England official Michael Saunders told Bloomberg TV that Brexit was to blame, not Liz Truss’s tax policy during her short tenure at 10 Downing Street.
Fall of the London Stock Exchange
The UK economy as a whole has been permanently damaged by Brexit. If Brexit did not significantly reduce the economy’s potential output, there would be no need to raise taxes and cut spending. While UK blue-chip stocks are down just 0.4% this year, the FTSE 250 is down 17%, reflecting falls in consumer-focused, capital-focused brands and retailers.
The leadership of French brands in the world
At the same time, French luxury brands are holding up well against global recession concerns. Owners of Louis Vuitton, LVMH, worth $360 billion, reported record sales in the United States and expected a solid fourth quarter in Chinese markets. The UK left the EU at the end of January 2020. As of January 1, 2021, the country is no longer a member of the EU customs union and the internal market. This has caused significant economic problems in this country.
Declining trade with Europe after Brexit
Trade with the EU has declined because, despite the comprehensive agreement, tariffs are necessary for some areas, and bureaucracy has generally increased significantly. As it is more expensive and time-consuming for EU citizens to come to work in the UK, the shortage of skilled workers has also increased.
In the 2016 Brexit referendum, 51.9% of participants voted to leave the EU, and 48.1% voted to remain in the EU. Brexit supporters are now in the minority, according to polls. The UK did not have a good time in the post-Brexit era and has faced many problems, especially in the economic field. Disputes about Brexit continued between London and Brussels after its implementation. A sharp decrease in UK production and demand for goods and services resulted from Brexit.