Britons, who are beginning to mourn their beloved sovereign, have long been grieving what was another rock in their country, a thriving economy.
Posted at 6:00 a.m.
How did a country that was the cradle of modern capitalism and the industrial revolution become such an economic and political disaster?, wondered recently The Economist.
Bad news continues to pile up on the economic front for the UK, which is headed straight for a deep recession. The country had not yet recovered from the years of dissension that preceded and followed its exit from the European Union, and which are still continuing, when the war in Ukraine broke out.
The resulting energy crisis is a disaster for the British, who are islanders and do not have the same options as the rest of Europe to mitigate rising energy prices.
The energy bill of British households, which has doubled over the past year, continues to rise. Another increase of 80% was announced for the 1er October, which forced the UK government to respond with another massive injection of cash to soften the blow.
Prime Minister Liz Truss, who has just succeeded Boris Johnson, had to backpedal fairly quickly. She, who had clearly come out against direct state aid because it does not solve the basic problems, must do the exact opposite.
A few days after arriving at 10 Downing Street, the new prime minister announced an unprecedented aid package to help Britons cope with rising energy prices. This will be capped for two years, with the aim of calming inflation.
The cost of these aid measures, which are in addition to those already introduced by the previous government and which quickly proved to be insufficient, has not been specified. But we know it will be expensive. According to the estimates of Times from London, the bill would amount to 150 billion pounds (227 billion Canadian dollars), twice as much as the public aid given to workers by the government during the pandemic.
Inflation at 22%?
The supply problems generated by the post-Brexit chaos had already driven up the cost of living in the UK faster than elsewhere in Europe. The Bank of England, which was the first of the major central banks to raise its interest rates last year, must work twice as hard to combat inflation which currently exceeds 10%.
The Bank of England postponed its rate decision due to be announced last week, due to the death of Elizabeth II, but another hike is expected. In its most recent announcement, in August, the bank acknowledged that inflationary pressures had intensified and that the official inflation rate would reach 13% this fall. A recession is inevitable, predicts the Bank of England, and it could last a long time.
If the energy crisis were to last longer, the inflation rate could climb beyond 22%, according to economists, including those at Goldman Sachs.
The decline of the British economy is reflected in the value of its currency, which recently hit a 37-year low against the US dollar and continues to decline against the euro.
The new Prime Minister has therefore entered a field of ruins and she promises to put the country back on the path to prosperity. Its main recipe is to reduce taxes and duties, as a worthy admirer of Margaret Thatcher that she boasts of being.
Liz Truss has already announced that she will lift the moratorium on hydraulic fracturing and encourage oil exploration in the North Sea in order to increase the security of oil and gas supplies.
Like many other countries, the UK has pledged to be carbon neutral by 2050. But soaring energy prices are now pushing the country towards abandoning its climate change commitments. climatic changes. As soon as she arrived, the Prime Minister said she wanted to review the goal of carbon neutrality in 2050 “to ensure that it does not place too heavy a burden on businesses and consumers”, she declared publicly.
We shouldn’t have to choose between the environment and the economy. When that happens, the economy often wins.