For months, the UK suffered from a leadership vacuum as the country slid into recession and a humanitarian crisis caused by rising energy bills.
“It’s just one hit after another,” said Martin MacTag, who heads the UK Small Business Consortium. “I’m afraid I won’t find any good news.”
The contenders to succeed Johnson – current Secretary of State Liz Truss and former finance minister Rishi Sunak – face calls to announce a dramatic intervention sooner. who are they He becomes the country’s fourth conservative leader in a decade.
“Everyone is assuming there will be a quick and decisive announcement that will put this issue to bed, or at least give people reassurance,” said Jonathan Neame, who runs Shepherd Neame, Britain’s oldest brewer. “If he wasn’t there, this person would be under too much pressure.”
Household energy bills will rise 80% to an average of £3,549 ($4106) a year from October. Analysts say the family price cap could happen It rose to more than 5,000 pounds ($5,785) in January and jumped above 6,000 pounds in April ($6,942).
As people are forced to reassess their budgets, the consumption boom that followed the Covid-19 lockdown is quickly dissipating. The Bank of England has warned that the British economy will fall into recession in the coming months.
“The main challenge posed by high energy prices is that households that use a lot of energy – particularly poor households – will really struggle to make ends meet,” said Ben Zaranco, chief economist at the Institute for Fiscal Studies. “It would already mean big cuts in other areas of spending.”
“It’s really daunting for a lot of companies, especially the ones that have come through Covid in a weakened state,” McTaggo said. “They are now struggling to deal with yet another once-in-a-lifetime disaster.”
A collapse in sterling could exacerbate problems, making it more expensive to import energy and other goods, leading to higher inflation.
“Brexit has happened,” said Turner. “It’s what it is, we all have our own opinions about it.” “But we have to work with it to make it better for us, and I’m just striving to see if there’s any impetus to do that.”
There are no easy solutions
“Benefits of cutting [taxes] “It’s going to be largely flowing in people who pay more taxes, which are generally the people with more money,” said Jonathan Marshall, chief economist at the Resolution Foundation.
“Energy is expensive, gas is expensive,” Marshall said. “To avoid freezing people in their homes, it has to be paid for. But the state does not need to pay for it to people who can afford it.”
There are also questions about how the next government will tolerate large-scale economic intervention, especially if cutting taxes – and thus government revenues – is the priority.
But this is no longer the case. The Bank of England has been aggressively raising interest rates while trying to rein in inflation. This will make servicing its debt increasingly costly for the government. The UK also issued a large number of inflation-linked bonds, adding to its vulnerability.
“It’s the perfect mix of challenges that make public finances look at risk in a way they haven’t been lately,” said IFS’s Zaranco.