British Economy – Professor John Bryson
It is fascinating to reflect on a text written in late 2020 which speculated on the main trends and patterns in the UK economy for 2021.
This text highlighted that there would be a continued shift to online consumption and that by mid-2021 the UK economy would, with vaccination, enter a period of post-pandemic recovery with an expected increase in spending consumption in hotels and travel by the end of the year. the second quarter of 2021. Post-Brexit discussions were highlighted, including continued discussions on financial services between the UK and EU.
The result is that the UK, like every other country, is still in the grip of the COVID-19 pandemic. All countries and people must get used to living with COVID-19 and living with pandemics. It is important to remember that there will be more pandemics.
On 12 August 2020, my forecast for the UK economy was “that there will be a period of significant economic growth from 2023”. This period of significant economic growth may now occur later than 2023 given the lingering impacts of COVID-19, but will occur given rising employment, wage inflation linked to skills shortages and an increase in household savings. The UK household savings rate peaked in July, but remains well above pre-pandemic levels. Ultimately, these savings will support a period of growth.
Ongoing discussions between the UK and the EU continued to be complicated by the fish issue and discussions regarding the Northern Ireland Protocol. In 2022, the EU will have to adapt to Germany’s new three-way coalition and the lingering consequences of the 2022 French presidential election. Currently, Brexit is being politicized by France to support a national rather than an international agenda and it The new German government is likely to adopt a similar approach. This is regrettable and it is time for all EU member states to accept that the UK has left the EU.
At the end of 2021, members of the World Trade Organization (WTO) agreed a transformational deal that will reduce the costs of trading in services by around £113 billion per year. Signatories included the UK, US, EU and China. The UK will be one of the main beneficiaries as it is the world’s second largest exporter of services. The main sectors that will benefit include banking, information technology, telecommunications, engineering and architecture. This deal highlights that the UK is playing an increasingly international game rather than one primarily focused on the EU. Thus, this new WTO agreement supplants some of the ongoing discussions between the UK and the EU on trade in services.
There are a range of supply constraints that could dampen UK economic growth in 2022. These include skills shortages and hard-to-fill vacancies, inflation in energy prices and its impacts on households and businesses, as well as supply chain disruptions. There are also the ongoing impacts of COVID-19 and new variants. Nevertheless, consumption will drive economic growth in the UK in 2022, unemployment will continue to fall, but inflation will rise due to rising energy and raw material prices and supply shortages.
It is important to place life with this pandemic in the context of climate change. So, there needs to be an increasing focus on decarbonising manufacturing and everyday life in the UK. The next decade will be marked by rapid and revolutionary change, as governments, consumers and businesses begin to take climate change seriously.
British Politics – Dr Matt Cole
Prime ministers’ room for maneuver diminishes over time, like the space around a flooded island. Areas of parliamentary rebellion, media criticism and party divisions fill up at different times, and electoral victories may block them temporarily, but the waters continue to rise. Many commentators see 2022 as Johnson’s king tide. Where does the pressure come from?
In Parliament, the Prime Minister has suffered rebellions over social care, parliamentary standards and Plan B. These have attracted MPs from different sides of the Conservative Party, but a hard core of critics is growing in a way which is reminiscent of the decline of Prime Ministers Major and May.
COVID-19 restrictions and the immediate effects of Brexit are stifling economic growth as the government must begin to recoup the costs of its response to the pandemic. The expected pressures on the cost of living in 2022 will prove difficult to explain within the framework of the “red wall” with MPs already torn.
Sleaze is the hallmark of this knot of problems. In times of stability and prosperity, Christmas parties and second jobs may be considered exceptions to a general rule of competence; but when a controversy takes place against a backdrop of difficulties, the accusation of hypocrisy is harsh.
The Prime Minister’s over-promising enthusiasm, whether on Brexit, leveling up or COVID-19, has plunged his and his party’s position into the red, and for the Conservatives nothing is more unpopular than not being appreciated by the public. In time for May’s huge local elections, he must change this image and hope that two threats remain at bay: a stronger opposition; and a rival on his side.