Crisis of British economy

What needs to be done

For centuries, Britain has been the hub of political ideas, scientific inventions, industrial concentration, philosophical ideas and artistic skills. It has been the main protagonist of European colonialism. The country was emerging as an alternative superpower during the declining era of the Ottoman Caliphate.

The rise or fall of civilisations, caliphates, empires and world powers is not a momentary or spontaneous event but the process of centuries of political, scientific, social, economic, financial, strategic, philosophical evolution and war campaigns set the scale of the global impact of any region or civilisation and it is this process that determines the criteria for the superpower status of a state or nation based on its global supremacy.

Britain has also been an important centre of ideologies, lifestyles and concepts in the world such as capitalism, liberalism, neoliberalism, anarchism, secularism, socialism and communism. The Great British Revolution of 1686, the American Revolution of 1776 and the French Revolution of 1789 started the era of enlightenment. That era was actually the beginning of liberalism. Against liberalism, Communism emerged as an alternative system of life.

Liberalism cultivated the ideology of capitalism, while Communism emerged as another ideology against the ownership and the concentration and exploitation of the capital. The ideological cultivation of capitalism was done by Adam Smith, who was born in 1723 in the eastern coastal town of Kirkcaldy in the province of Scotland, Great Britain, while communism was ideologically armed by Karl Marx who spent the last half of his life in London, the capital of Great Britain, and here he wrote the controversial work “Das Kapital” or ‘Capital’.

The introductory words about Great Britain became a bit long but we actually had to present some facts about its economic conditions in this presentation. First of all, let’s start by shocking you.

Who do you think is Britain’s richest person or family? Of course, you will say the same as me that obviously, the richest person in Britain will be an Englishman, or it can also be said that an American, French, German, Dutch, Spanish or Italian could be the richest person or family in Britain.

Yes, it is not so, I end this curiosity, the richest family in Britain is the family of Parmanand Deep Chand, born in Shikarpur, Sindh, who has assets of $50 billion in the United States alone, apart from the United Kingdom. This man established his company Hinduja Group in Shikarpur in 1914. This group established its first foreign office in Iran in 1919. The group deals internationally in automobile, information technology, media entertainment and communication, infrastructure projects, oil, chemicals, energy, real estate, healthcare and many other sectors.

Now, we come back to the current state of the British economy, which is currently in dire straits. The British economy suffered from the current situation under the influence of double events. The biggest blow came from Brexit coupled with the Covid-19. After Brexit, there has been a shortage of manpower due to the migration of Europeans from the UK.

At the same time, the Bank of England turned its attention towards the people who were leaving the job market. Moreover, the increasing burden of taxes began to show weaknesses in tax revenue. In addition, the costs arising out of the Covid-19 have increased the burden on social security and healthcare. Thus, the threats to the British economy began to emerge.

For example, the current account deficit, decline in productivity growth, decline in global investment, imbalanced growth rate and inflation acted as the barriers to economic growth. Besides, inflation going into double-digits was no less a sign that the dangers of recession started hovering over the country. The result was that the Bank of England raised the interest rate significantly.

European experts, especially Lawrence Boone, chief economist of a Paris think tank, said that the UK fell victim to the crisis due to a combination of problems, including rising interest rate, the imposition of heavy taxes, a decline in trade and a huge increase in food and energy costs.

Meanwhile, the BBC predicted that the GDP will remain under pressure in the second and fourth quarters of the current financial year.

Economists are predicting that the rising interest rate, inflation and recession fears could result in house prices falling 10 to 15 per cent. The Bank of England has expressed fears of a recession this year. There are several reasons for the current situation but the negative impact of the Ukraine war on the economy of Europe is being deliberately avoided. The experts are also expressing fears that the recession in the UK may continue into 2023. Thus, the recession, which Great Britain was subject to at the beginning of this year, will continue until the end of the next year.

Some experts believe that the duration of the British recession is up to the next three years. However, they believe that the economic situation in the UK will not be as serious as the estimates are being made about the severity of the recession.

Some experts are of the view that the economic uncertainty will prevail for a long time. Like other economies in Europe, the British economy will continue to be shadowed by the energy crisis. The announcement of two million barrels/day reduction in oil production by the OPEC countries has sounded a big alarm bell.

Although US President Joe Biden has come to threaten Saudi Arabia with serious consequences for this move, he also knows that Saudi Arabia is one of the 13-member countries of OPEC.

In addition to Saudi Arabia, this group of oil exporting countries includes Iran, Iraq, Kuwait, Libya, Congo, United Arab Emirates, Venezuela, Algeria, Angola, Guinea and Gabon.

In 2016, Russia also joined this group, which produces one million barrels of oil/day. Regardless of the impact of Saudi Arabia’s threat, the question will remain as to how Russia will be threatened with serious consequences. Russia, in the form of the Ukraine war, has moved far beyond the effects and consequences of such threats.

We return to the UK economy, which has been in recession for several years. Estimates of 3.2 per cent growth in the British economy do not bode well.

The unemployment rate in the UK has reemerged after almost 52 years. The British economy suffered another shock with the death of Queen Elizabeth II and the subsequent mourning period for her death. However, the economists and analysts see a ray of hope in this situation.

Britain is at a turning point in the current situation. At present, meeting the daily expenses is a major problem for the British citizens. Inflation has reached the highest level of around 10 per cent after 1980. Moreover, this crisis has also become serious as a result of massive cuts in the energy resources by Russia.

The British pound fell to a 37-year low against the US dollar. Besides, the growth rate is another problem. In recent days of mourning, the growth rate of the world has been negative. The energy prices in Europe have put a significant burden on the people’s daily expenses. The energy prices have tripled from what they were a year ago. Last year, these prices were 70 euros/kilowatt, which has increased to 217 euros/kilowatt, at present. This year’s summer broke century-old records but this winter will also be a big problem for the rainforests. It will probably also be very difficult for the people to get the necessary funds to pay their electricity and gas bills.

In such a disappointing situation, contrary to the estimates of the economists and analysts, it is expected that the pace of economic growth will increase in April next year.

The Office for National Statistics is predicting that a review of last month’s data reveals a different picture of the economy.

The UK’s chief economist said that the data shows that despite an increase in inflation, the economy feels like it is moving towards growth. There were earlier reports that the Bank of England would raise the interest rate by 0.5 per cent in August but it actually added 0.25 per cent. It is estimated that despite bad conditions, the economy seems to be recovering.

Despite optimism, the United Kingdom needs to improve the trade balance to bring improvement in its economy, create an environment for foreign investment and make up for the losses of Brexit, as well as energy.

To overcome the crisis, instead of looking at the seriousness of the issues from the point of view of the American interests, they have to look at their own objective situation.