By:Hussain Al-Qemzi
Britain experiences a serious problem when it comes to its economy as the British economy has clearly lagged behind its peers of the other advanced economies. In fact, economists in the UK predict that the economy of their country might be the only one which will not grow, thus meaning zero growth until 2025.
It is worth mentioning that the British economy has not recovered from the pre-Covid levels, which in turn raises the following question: When exactly did the economic growth drivers in the UK start to stop?
Actually, the economic growth drivers in the UK started to draw back with the emergence of the global financial crisis because in the following period until 2016, the GDP of the UK began to drop after it was the fastest-growing GDP in the European bloc. However, to a certain extent, the UK’s GDP remained at the top compared to the GDPs of the G7 member states. At that time, the Eurozone was at a critical stage, to the extent that even the economy of the United States was not at its best. But what happened back then was that the economies of the European bloc and the United States seemed to be improving in a way better and faster than that of Britain. That year was the referendum year of Britain’s exit from the European Union (Brexit), which was clearly the reason behind that outperformance over Britain’s economy.
Brexit was definitely one of the key factors that resulted in the contraction of Britain’s economy. In reality, the financial sector was amongst the top economic sectors in the UK, especially in London, the renowned global financial hub. This sector was not affected so much but
nearly all the other productive sectors depending on exporting to the European market experienced a sharp decline. That long-term productivity shock caused a decrease in employment and an increase in the number of the unemployed. In addition, the political volatility of the British leadership gave an impression of instability and increased investment uncertainty because investors do not know what the government intends to do, and the business environment was no longer clear.
For its part, the Bank of England expects zero growth until 2025. In contrast, the economy of the European Group will grow by 7% during that period, and the economy of the United States is expected to grow by 10%. Now, the threat the UK is facing during this non-growth period is a stagnation of living standards and the difficulty of financing public services, such as health and education.