A report issued by "Qatar National Bank" (QNB) said that growth in the United Kingdom will be negatively affected by weak supply and demand factors, noting that despite its good reputation in the field of preparing sound policies, it has witnessed significant fluctuations in the past few months.

The weekly report of Qatar Bank indicated that the main error in the policy of former Prime Minister Liz Terrace was the so-called "mini-budget", which was rushed and bypassed the usual scrutiny by the Office for Budget Responsibility in the United Kingdom.

From a policy setting perspective, the report noted, the Truss budget was not "miniaturized" because it attempted to make major policy changes, but rather because it included a wider fiscal deficit due to unfunded tax cuts.

The report indicated that Rishi Sunak assumed the position of Prime Minister on October 25, 2022, at a time when Britain is facing 4 economic headwinds, which are:

  • Tightening fiscal policy.

  • Tightening monetary policy.

  • Energy crisis is developing in Europe.

  • Labor shortage resulting from Brexit.

 The Qatar National Bank report considered that the United Kingdom's exit from the European Union gave greater flexibility in policies, and allowed it to be more proactive in responding to the crisis, including through faster implementation of support measures for households and companies compared to European Union countries.

 However, the report added, "However, high energy prices and a drain on government financial resources remain a headwind to the economic outlook."

 The problem of labor shortage

 The report saw that the supply side of the UK economy remains constrained by the labor shortage, which is one of the repercussions of the UK's decision to leave the European Union, as the UK's agricultural, manufacturing and service sectors are accustomed to the abundance of low-cost labor that used to come from countries in central and eastern Europe.

But that - the report adds - changed with Britain's exit from the European Union and the exclusion of the United Kingdom from the European Union's policy on the free movement of labor.

He pointed out that the global COVID-19 pandemic has exacerbated the situation, as the UK is currently suffering from a severe labor shortage in many sectors of the economy.

This causes continuous upward pressure on wages and thus inflation as well, despite weak demand expectations. "The labor shortage represents another headwind to the UK's economic outlook," the report said.

The report predicted that consumers in the United Kingdom will face a decrease in disposable income, and that producers in the United Kingdom will be exposed to higher costs and a lack of competitiveness, which will affect their overall profitability.

"This situation will negatively affect both consumption and investment, which will limit growth in the UK in the short to medium term," he said.