Why does the British economy achieve the worst performance among the Group of Seven countries?

The latest bulletin of the International Monetary Fund on global growth carried bad news for the British economy, placing it in the category of countries that will witness an economic contraction in 2023, unlike all major countries.

Britain has become the only country among the Group of Seven countries that will achieve a decline in economic growth by 0.6%, which makes its performance worse than the performance of the Russian economy, which is subject to heavy Western sanctions.

The expectations of the International Monetary Fund came to exacerbate the troubles of the British economy and scratch its image in front of global investors after a difficult year in which the United Kingdom witnessed dramatic events that plunged the value of the pound sterling in an unprecedented way.

And unlike all major countries that will achieve different growth rates - led by Japan, China, the United States and Canada - Britain will witness a difficult year despite being the sixth economy in the world.

Why did the IMF put a pessimistic forecast for the British economy?

The International Monetary Fund provides a number of data that made it judge that the Kingdom's economy will be unable to achieve any growth during this year, including high energy prices, heavy dependence on gas, and Britain's inability to reduce energy bills for citizens.

In addition, the high costs of obtaining loans due to the Central Bank's policy of raising the interest rate, which reached 4% in order to control the inflation rate, which still exceeds 9%, the highest in 4 decades.

There are structural reasons that the British economy is suffering from and the International Monetary Fund is talking about, the most important of which is the lack of manpower, which leads to the decline of the British economy, and the UK labor market needs more than a million workers to fill the vacancies in the face of the government’s refusal to bring in foreign workers.

What does the British government say?

The British government justifies this decline in the economy's performance with the impact of the post-Corona pandemic, because Britain was the first country in the world to reopen all activities, which made it achieve a rapid recovery due to the intensity of demand and consumption, which contributed to the high inflation rate.

British officials say that the country is currently paying the price of a rapid recovery after Corona, and that is why it is seeking first to reduce the level of inflation.

Finance Minister Jeremy Hunt rejects all the pressure exerted on him by Conservative Party deputies to announce tax breaks during the spring budget, stressing that the most important goal before him is to reduce the rate of inflation at any cost, which is thus consistent with the policy of the British Central Bank.

Why did Britain fail to achieve economic growth?

The answer that the British Finance Minister knows and that economists and businessmen know is the inability to raise productivity, whether in the public or private sector, and this is mainly due to the acute shortage of manpower.

According to the Financial Times, the British economy has fallen more than any of the major countries since the economic crisis of 2009, and private sector investment has stagnated since the 2016 Brexit referendum.

Britain lost more than a million jobs after the Corona pandemic, which is equivalent to 4% of the total workforce, in addition to the exacerbation of the crisis due to government policies in dealing with immigrants, and it is estimated that the British market currently needs more than two million workers to fill the current void.

What about brexit?

You will not find any official document that explicitly acknowledges that Brexit had a direct impact on the decline of the British economy, whether it is related to the Central Bank, the Ministry of Finance, or the Office for Budget Responsibility, all of which are institutions that talk about the impact of the war in Ukraine and high energy prices, but they never directly blame Brexit. in a downturn in the economy.

On the other hand, a comparison of the situation of the British economy before and during Brexit will show that before 2016 it was equivalent to 90% of the German economy, and it was estimated at that time that the UK economy would surpass its German counterpart by 2024, but now it is equivalent to only 70% of the German economy.

Among the apparent effects of Brexit is the decline in private investments in the British market, because economic expectations were indicating that these investments would reach 80 billion pounds sterling by 2022, but they amounted to 55 billion pounds sterling only, and the reason is the decline in the attractiveness of the British market for investments after withdrawal from the European Union. .

Is there a solution soon?

The International Monetary Fund sent messages of reassurance that the British economy is on the right track after the government approved a budget based on cutting public spending and raising taxes to bridge a budget deficit of 55 billion pounds sterling.

Government expectations also indicate that the inflation rate may fall below 4% before the end of this year, which means a decline in the interest rate on loans.

However, the structural crisis that the British economy suffers from will remain, and the government refuses to answer it, which is: What did the United Kingdom benefit from Brexit?

In addition to its refusal to find solutions to the labor crisis that affects the British economy, which means that it may not return to the size it was before the 2016 European Union exit referendum.