The British economy is, as we know, currently facing recession and inflation. Their initially unstable government and change of economic policies led to a rather interesting path from somewhat manageable to now plainly unreasonable.
Although the UK has not been alone in the fight against inflation, the problems there have been noticeably higher than in other countries. The hit has been especially harsh with food costs and gas. The UK as a country is quite dependent on gas operated heaters and lights, for which most of the gas used is imported from limited suppliers.
Coming to food inflation, the UK has a huge food industry, being the third largest importer of edibles in the world. The constant fluctuation affects prices of not all commodities but more commonly on protein sources, sugar, coffee and the like. This could be owing to the fact that a lot of these specific goods are exported in large quantities and this global demand caused the price hike for these commodities. The recent change in the climate of the region probably did not help the yield of crops either as temperatures have been unusually high of late, with its average temperature being 13°C this year, when about fifteen years ago it was 8°C.
In 2022, when the conservative party had just won the elections, Liz Truss occupied the prime minister’s cabin for only 49 days, but in that short period of time a rather questionable decision was taken to reduce loan interest rates. There was already slight inflation due to internal factors at that point of time and here’s why it caused problems. During inflation the common people are obviously struggling to make ends meet but wont borrow money if interest rates are high because they can’t give the government money that they don’t have. By reducing the interest rates on loans, the government essentially waved the green flag at the public to borrow as much money as they wanted and pay back very little interest. Just about everybody who felt like they could use some extra maintenance money, for rent, bills and other necessities, borrowed money in the confidence that the sum they’ll be paying back won’t be much higher. This meant that the government lent too much money to too many people in too little time with very little profit coming back to the banks. As the circulation of money increased, its value decreased and livelihood in the country got more expensive but the common workers’ salary did not see much of a raise.
The UK is also battling a housing crisis parallel to this mess. The gap between the rich and the poor is becoming bigger and more evident and housing has become a privilege that only the wealthy can afford. The rising immigrant population combined with limited housing supply and inflation resulted in said crisis. Both urban and rural areas saw significant change in housing and rental prices, but it is safe to say that London is taking the strongest blow. The prices were never truly affordable but as the population grows, the development of new housing areas does not grow at the required pace which means there's more people than the country’s housing can currently accommodate.
A vaguely emphasized fact is that the United Kingdom contains three distinct legal jurisdictions in Scotland, England and Wales, and Northern Ireland, each retaining its own legal system even after joining the UK. Wales holds within it a football spectacle when Ryan Reynolds and Rob McElhanney, popular film entertainers, took ownership of Wrexham A.F.C, plunging into more than a sporting club. Wrexham is a tragic story of post-industrial collapse but in the football club’s recent journey to securing consecutive promotions up in the EFL, the local economy is seeing growth with tourism and the iconic Wrexham Lager sales booming. The town is home to St. Giles’ Church whose 135 ft Gothic spire is one of the ‘Seven Wonders of Wales’ and Tŷ Pawb (‘Everybody’s House’ in Welsh), a combination food hall, local market and free art gallery at the city centre has visitor information with entries from Japan, US, Finland and South Africa.
Meanwhile, the fresh Labour win has boosted optimism amongst Stormont (Northern Ireland assembly) parties, who for years complained about the negative impacts of Tory austerity, given that most of what Stormont gets to spend is block grant from Westminster. One of Labour’s clearest and most consistent policies is that it will seek a new agreement for agri-food products traded between the UK and EU with the aim to eliminate most border checks created by the Tory Brexit deal, much to the jubilation of a £5.4 billion agri-food industry in Northern ireland, where 75% of land use is towards agriculture and allied activities.
The government is making efforts to improve the situation in the country. A stable economy would result in a stable growth of prices where alongside prices, income is also steadily growing. The abrupt increase in prices and population is causing the British economy to suffer quite a bit. High and low inflations are however an economic pattern that we see all the time. We saw the Sri lankan economy quite literally rise from ashes and we will probably watch the British economy recover too.
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