In 2017, Adam Posen from the Peterson Institute for International Economics warned that Brexit would leave the UK more exposed to shocks, with a more closed economy, less access to markets and added friction with its largest trading partners.
“You are ruining your competitiveness specifically with your largest trading partner,” Posen, a former policy maker with the Bank of England, said almost a year after the British electorate voted to leave the European Union.
“They’re going to have higher inflation, lower purchasing power, a weaker pound,” he continued.
More than five years on, some of Posen’s predictions are ringing true as a host of indicators signal hard times ahead for the world’s fourth-biggest importer of goods.
Data released Wednesday showed the UK trade deficit in August widened sharply to a five-month high of £9.5 billion ($10.5 billion). Imports of goods excluding precious metals surged by 4.3%, eclipsing a 0.7% rise in exports. The shortfall is partly due to rising gas prices which are pushing up the value of foreign imports, which in turn are helping fuel inflation.
With the cost of living so high, public sentiment is souring and union employees crucial to Britain’s strength as a trading power are on the picket line this week demanding higher pay increases. The strike at the Port of Liverpool, following similar actions at Felixstowe, are bogging down the flow of import and exports, according to FourKites.
A separate report Wednesday showed the UK economy experienced an unexpected 0.3% drop in output, driven by a sharp decline in manufacturing and a small contraction in services, according to the Office for National Statistics.
That could mean the International Monetary Fund is too optimistic with its latest forecast that the UK economy would grow 0.3% next year — a projection that was calculated prior to the unveiling of Chancellor Kwasi Kwarteng’s much criticized mini-budget last month.
UK Markets Whipsaw as Confusion Reigns Over Nation’s Policies
For the British economy, other headwinds are mounting:
Cost of living crisis: Higher heating and electricity bills are hurting many UK households and pushed inflation to a four-decade high. Reduced purchasing power has already forced consumers to pull back spending and retailers are bracing for a significant drop in demand ahead of the Christmas shopping season.
Steep housing costs: This month, UK mortgage rates jumped above 6% — the highest readings in more than a decade. Rising interest rates are expected to reduce disposable incomes by about 5% in the next year and could deal a body blow to buyer demand.
Pound volatility: Sterling has gyrated on the fiscal policies of Prime Minister Liz Truss and the Bank of England’s bond market interventions. Meanwhile, the elevated cost of borrowing is likely to dampen UK growth and investment, according to financial services firm Ebury.
“Post-Brexit trade frictions, sluggish demand from trading partners and a looming global recession will also hold back demand and act as another drag on UK exports,” Jack Sirett, Ebury’s head of dealing, said in an email statement after Wednesday’s trade report was released.
In his 2017 presentation, Posen recalled an old phrase about being “mugged by reality” as he discussed Britain’s future under Brexit.
“Don’t entertain the fantasy that this is going to make Britain this wonderful — like Hong Kong was in the ‘70s,” he said back then. “It’s going to make Britain like Britain was in the ‘70s. That is a step backward.”
Bryce Baschuk in Geneva
Its a well known fact that Bloomberg is a hot bed of socialists and woke lefties part of the Anti Growth Coalition
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In 2017, Adam Posen from the Peterson Institute for International Economics warned that Brexit would leave the UK more exposed to shocks, with a more closed economy, less access to markets and added friction with its largest trading partners.
“You are ruining your competitiveness specifically with your largest trading partner,” Posen, a former policy maker with the Bank of England, said almost a year after the British electorate voted to leave the European Union.
“They’re going to have higher inflation, lower purchasing power, a weaker pound,” he continued.
More than five years on, some of Posen’s predictions are ringing true as a host of indicators signal hard times ahead for the world’s fourth-biggest importer of goods.
Data released Wednesday showed the UK trade deficit in August widened sharply to a five-month high of £9.5 billion ($10.5 billion). Imports of goods excluding precious metals surged by 4.3%, eclipsing a 0.7% rise in exports. The shortfall is partly due to rising gas prices which are pushing up the value of foreign imports, which in turn are helping fuel inflation.
With the cost of living so high, public sentiment is souring and union employees crucial to Britain’s strength as a trading power are on the picket line this week demanding higher pay increases. The strike at the Port of Liverpool, following similar actions at Felixstowe, are bogging down the flow of import and exports, according to FourKites.
A separate report Wednesday showed the UK economy experienced an unexpected 0.3% drop in output, driven by a sharp decline in manufacturing and a small contraction in services, according to the Office for National Statistics.
That could mean the International Monetary Fund is too optimistic with its latest forecast that the UK economy would grow 0.3% next year — a projection that was calculated prior to the unveiling of Chancellor Kwasi Kwarteng’s much criticized mini-budget last month.
UK Markets Whipsaw as Confusion Reigns Over Nation’s Policies
For the British economy, other headwinds are mounting:
Cost of living crisis: Higher heating and electricity bills are hurting many UK households and pushed inflation to a four-decade high. Reduced purchasing power has already forced consumers to pull back spending and retailers are bracing for a significant drop in demand ahead of the Christmas shopping season.
Steep housing costs: This month, UK mortgage rates jumped above 6% — the highest readings in more than a decade. Rising interest rates are expected to reduce disposable incomes by about 5% in the next year and could deal a body blow to buyer demand.
Pound volatility: Sterling has gyrated on the fiscal policies of Prime Minister Liz Truss and the Bank of England’s bond market interventions. Meanwhile, the elevated cost of borrowing is likely to dampen UK growth and investment, according to financial services firm Ebury.
“Post-Brexit trade frictions, sluggish demand from trading partners and a looming global recession will also hold back demand and act as another drag on UK exports,” Jack Sirett, Ebury’s head of dealing, said in an email statement after Wednesday’s trade report was released.
In his 2017 presentation, Posen recalled an old phrase about being “mugged by reality” as he discussed Britain’s future under Brexit.
“Don’t entertain the fantasy that this is going to make Britain this wonderful — like Hong Kong was in the ‘70s,” he said back then. “It’s going to make Britain like Britain was in the ‘70s. That is a step backward.”
Bryce Baschuk in Geneva
Its a well known fact that Bloomberg is a hot bed of socialists and woke lefties part of the Anti Growth Coalition
*Stop Talking Great Britain Down!*