Continuation of UK economic recession: Economists warn Rishi Sunak

According to a report by Guardian, economists have cautioned Rishi Sunak about the potential recession that the country may face next year due to the high inflation rate. The Bank of England has increased the interest rate in an effort to control inflation, but it is uncertain if this will be enough to prevent a recession. It is important to examine why the UK is currently facing an economic crisis. Additionally, it would be useful to understand the strategy implemented by the UK government to reduce inflation and what the International Monetary Fund’s forecast is for the UK economy for the upcoming year.

The UK economic recession

Economists have forecasted that in order to control inflation, the Bank of England may need to push the UK economy into a recession. This could lead to an increase in borrowing costs for mortgages and loans for millions of households. The media has reported that British Finance Minister Jeremy Hunt has faced significant criticism at the end of a week marked by concerning economic events. It appears that despite the cost of living crisis and the pressures it has placed on families, Hunt believes this is a necessary price to pay.

Expressing the concern of the Labor Party about the UK economy

Keir Starmer, the leader of the British Labor Party, also expressed concern about the situation and said, “Almost nobody feels better off after 13 years of this government. I’m apprehensive about mortgages. People are struggling to pay the bills. Mortgages are a big part of that.” if interest rates continue to rise, “we’re in danger of engineering a recession” said Jagjit Chadha, the director of the National Institute of Economic and Social Research. 

Rishi Sunak’s failure to deliver on his promise to curb inflation

According to this report, since the financial markets raised the borrowing costs of the UK government to the highest level since Prime Minister Liz Truss, The Prime Minister’s ability to deliver on his promise to halve UK inflation this year has been called into question. One of Rishi Sunak’s five election promises was to split the UK inflation rate. The official statistics showed a few days ago that the annual UK inflation rate in April decreased less than expected and reached 8.7%; Therefore, the stability of energy prices has been mainly compensated by the increase in food prices.

Interest rate increase by the Bank of England

Financial markets predict that the country’s central bank will increase the interest rate to 5.5% by the end of the year; This rate is currently 4.5 per cent. The data of the Federal Statistical Office showed that the growth of the gross domestic product of Europe’s largest economy and the world’s fourth-largest economy in the first three months of this year was negative, and the economy of this country has practically entered a recession. Considering that the German economy had negative growth in the last quarter of last year, this country has entered an economic slowdown.

Rising prices in the UK

The research results of Consumer Watchdog Which? showed that the trend of increasing food prices in the UK has continued, and the costs of some products, from meat to yoghurt and vegetables, in this country have doubled compared to last year. According to Bloomberg, the increase in the price of goods in British stores has become the main inflationary concern of the central bank of this country.

Increase in mortgage borrowing costs for English households

The BoE has recently increased the interest rate for the twelfth time in the past months. The increase in the price of goods and food in this country’s stores has replaced the rise in the price of energy carriers in the inflation priorities of the Bank of England. It has become the primary concern of the officials of this bank. Economists believe the Bank of England has set the stage for further increases in borrowing costs on mortgages and loans for millions of households.

The highest UK inflation rate in the last 40 years

The information and data published by the Bank of England show that the annual inflation rate in this country increased to 11.1% last October and recorded the highest rate in more than 40 years. This event happened after energy prices and food bills increased worldwide the previous year, and the reason was due to the difficulties that arose after the war between Russia and Ukraine regarding restrictions on the supply of needs and the lifting of quarantine after The spread of the covid-19 virus infection has subsided.

Rishi Sunak’s government’s ban on raising wages

In response to these data, Jeremy Hunt, the Chancellor of the Exchequer, said that his main priority is to curb inflation so that the salaries and benefits received by the people have more purchasing power. However, Prime Minister Rishi Sunak’s conservative government insists that increasing the salaries of government employees in the context of rising inflation will further fuel inflation.

The increase in the unemployment rate in the UK in recent months

The situation in the UK is worrisome as the unemployment rate reached 3.7% in December last year and has been on a steady rise for three consecutive months since September. Moreover, workers’ pay is being further strained by rapidly increasing inflation, leading to widespread unrest and protests across the country. Additionally, in October of the previous year, government employee strikes resulted in the highest number of lost working days in over a decade.

International Monetary Fund forecast of the UK economy

The International Monetary Fund (IMF) has predicted that UK’s economic growth this year will be worse than that of all major economies in the world. According to the estimate of this international body, the financial situation of the UK will be worse than all the other 19 members of the G20 group. This means that UK’s economic growth will be even lower than that of Russia, which faces tough Western sanctions. The International Monetary Fund says the UK economy will shrink by around three-tenths of a per cent in 2023 and grow by one per cent next year.

The continuation of the UK economic recession in 2024

As the wave of strikes in the UK intensifies and economic growth in the Eurozone decreases, it is anticipated that the UK’s economic recession will persist until 2024. Trade unions in the country are preparing for more widespread strikes due to the government’s failure to support and increase salaries for employees across various sectors. Nurses, locomotive drivers, train workers, border guards, post office workers, and other departments are planning to halt work through strikes. As a result, we can expect a fresh round of protests and strikes in the coming weeks.