In the midst of a political and financial crisis, the United Kingdom is accumulating negative economic signals

Published on: 21/10/2022 – 13:57 In the midst of the political slump linked to the resignation on Thursday of British Prime Minister Liz Truss, the United Kingdom is also going through an economic storm with flat activity, inflation above 10% – the strongest in the G7 – an energy crisis and millions of Britons falling into poverty. Liz Truss’ stint in Downing Street was record-breaking but it leaves deep scars for the UK economy. Record interest on the debt, fall in retail sales, confidence at half mast: the British economy is accumulating new negative signals in a country in the midst of a political and financial crisis. Interest on the British debt reached 7.7 billion pounds in September, 2.5 billion more than a year earlier and the highest amount paid out since these monthly statistics began in 1997. Since mid-2021, the state debt burden “has increased significantly, not because of the rise in debt”, but “largely because of inflation”, commented the Office for National Statistics (ONS) on Friday in its monthly report. Non-bank government borrowing under the aegis of the State increased by 2.2% year on year to 200 billion pounds in September, the highest level ever recorded since these statistics began thirty years ago – except for the record observed during the Covid pandemic – 19.>> Read also: “The pound sterling hits an all-time low against the dollar “Public debt reached for its part – excluding public banks – 2,450.2 billion pounds at the end of September, representing 98% of GDP and 2.5 percentage points of GDP more than a year earlier.” To stabilize the markets, I clearly said that difficult decisions were going to be taken in order to protect “the accounts of the State, warned Jeremy Hunt, the Chancellor of the Exchequer. Faced with the market debacle caused by his predecessor’s “mini-budget” at the Ministry of Finance, Jeremy Hunt immediately canceled almost all of these expensive and unfunded budget measures with devastating effect. He must present a medium-term plan on October 31. This proposal, which should include cuts in public spending and a possible increase in taxes, in total opposition to the campaign promises of the ephemeral Prime Minister Liz Truss, who was forced to resign in the face of the sinking of her government. Pressure is mounting in particular to impose a higher tax on the profits of energy companies. The British press evokes a possible taxation of banks, which benefit from the surge in interest rates. Fall in sales Jeremy Hunt’s plan is however uncertain, the new chancellor not being sure to remain in office in the next government. Faced with a political slump, the country is also going through an economic storm with flat activity, inflation at more than 10% – the highest in the G7 – an energy crisis and millions of Britons falling into poverty. These difficulties are being felt on consumption: retail sales, which have been declining for months, fell 1.4% in September compared to August. The National Statistics Office explains this decline not only by the rise in the cost of living, but also by the impact of the national day off declared on the day of the funeral of Queen Elizabeth II last month, with the closure of very many shops.>> To read again: “Fall of the pound sterling: the revolt of traders against tax cuts for the rich” The GfK index on confidence also testifies to the mood at half mast of consumers. jumped Thursday at the announcement of the resignation of Liz Truss, the pound fell on Friday: it lost 0.33% to 1.1196 dollars, around 7:45 a.m. GMT. Its historically depreciated level illustrates the mistrust of investors, just like, at Conversely, the rebound in long-term debt yields in the market. The cost of 30-year government debt rose to 4.022% around 07:45 GMT, crossing the 4% threshold. At the end of 2021, it was worth just over 1%. The “mini-budget” had pushed it to more than 5%, weakening asset funds held by pension funds and the Bank of England was intervened to prevent a financial crisis. “Political turbulence and the budgetary volte-face have eroded the credibility” of the country among international investors, observes Richard Hunter, analyst at Interactive Investor. the scale of the task awaiting the future government. With AFP