Years of crisis instead of new beginnings – how Brexit became an own goal for Britain’s Mahabad fire: Iran’s situation is deteriorating – you need to know that

Brexit should bring economic independence and make the UK economy more competitive and growing. There isn’t much evidence for this – there is less investment in the country, companies can no longer find a sufficiently well-trained workforce, trade with the EU is faltering and the last government under Prime Minister Liz Truss experimented with a radical program of libertarian restructuring of the economy. as the only solution.

The program failed: the central bank had to intervene in the capital markets to stabilize the bond markets. Politically, the ruling Conservatives are wearying – Prime Minister Liz Truss resigned after just 45 days. Leaving the EU will cost the UK dearly. Because it amplifies the consequences of the external crises: the corona pandemic, the war of aggression against Ukraine, the energy crisis. Charts show how inflation, economic output, foreign trade, labor market and government debt have developed.

pound in free fall

When the UK was still part of the EU and many European countries adopted the euro, the UK kept the pound. This also has to do with its long history: the pound is 1200 years old, making it the oldest currency still in use. It is also considered one of the most important reserve currencies next to the US dollar.

The currency has fallen rapidly in value lately. For example, when the now fired Minister of Finance Kwasi Kwarteng recently presented tax plans worth billions of dollars that had not been counter-financed. The financial markets feared a sharp rise in government debt and even higher inflation and interest rates. For a while, the pound was at the same level as the dollar. The currency had already lost enormous value under the predecessors of the resigned Prime Minister Liz Truss. The crash following the Brexit vote on June 23, 2016 was particularly devastating.

The currency’s depreciation is problematic for the UK economy for a number of reasons. British goods become cheaper for foreign companies. In Britain, however, the service sector is particularly strong, while the country imports a lot of industrial goods. The weak currency makes it difficult to balance the foreign trade deficit.

Goods from abroad become more expensive with each fall in prices, driving up inflation in the UK. Under Liz Truss, the pound had initially improved slightly. But the uncertainty in the markets is high and will only decrease if the new Prime Minister Rishi Sunak implements a fiscally responsible policy and brings the country back to growth.

Inflation almost like in Thatcher’s time

Inflation has been a problem since Brexit. Since then, it has risen to a new high in 40 years. In total, goods and services rose 10.1 percent in September compared to the same month last year, according to the British Bureau of Statistics. Inflation isn’t just caused by the energy crisis – it’s on top of it. Above all, it is the rising food prices, recently food prices were 14.5 percent more expensive. The background is also Brexit: Britain is dependent on food imports, such as pork – only 60 percent of demand comes from its own country.

When importing from the EU, there are now more import regulations to follow and delivery times have also increased, forcing companies to use warehouses in between – all the costs they pass on to the consumer. In addition, the supply chain problems caused by Corona and the Russian war of aggression are making the flow of goods more difficult.

The UK’s Institute of Grocery Distribution (IGD) predicts that the average monthly grocery shopping for an average family of four will be around £439 (€511) in January 2023. Last January it was just £396. Meat, grain and dairy products in particular, as well as fruit and vegetables, are likely to become even more expensive.

In 2015, so before Brexit, there was virtually no inflation, when it was 0.05 percent.

Weaker economic performance without the EU

Economic output has fallen since Brexit, gross domestic product has repeatedly shown negative growth, so economically the UK is in recession. According to British household experts, growth will be four percent weaker in the medium term than without Brexit. This would mean that the economic blow of leaving the EU would be greater than the economic impact of the corona pandemic.

Many sectors are affected by Brexit and the fact that business travelers in the EU need a visa: it has suddenly become more complicated to send technicians and engineers from the EU to the UK to service machines. The fishery had hoped for exclusive access to British waters – in vain. The EU will continue to fish in UK waters, albeit slightly less in the long run. The British lost fishing rights in Greenland. It is also more difficult to organize tours for music orchestras, rock bands or models in the fashion industry.

Only current data paints a rather sobering picture: September retail sales were 6.9 percent lower than the same month last year, and there was only a similar decline at the start of the pandemic. Before that, the per capita economic output was over $42,000 – in 2020 it was just a good $40,000.

Treated as a third country in foreign trade with the EU

The total trade volume with the EU has fallen by 20 percent, so sharply. Because the EU treats the UK as a third country and applies tariff restrictions. In January 2021, exports to the EU had already shrunk by 41 percent month-on-month. The flow of goods from the EU to Britain fell by 29 percent – ​​the biggest drop since the start of the national statistics in January 1997.

With Brexit, Britain has adopted more than 1,500 EU rules and regulations that have long been to be sorted out, amended and incorporated into UK law. But the government never had time for that, not even because of the ongoing political crises. As a result, the business-related authorities lack political guidance and the economy itself lacks a concept. The constant uncertainty discourages companies from investing. The much-vaunted trade deal with the United States, which was supposed to compensate for the decline in trade with the EU, still does not exist today.

The unemployment rate is low only because of mass migration

Brexit proponents are proud of one thing: unemployment in Britain is as low as it was in 1974. According to the statistical authority, it fell to 3.5 percent from May to August alone, a percentage point lower than before the corona pandemic.

The labor market in Great Britain is therefore booming – and that is actually a result of Brexit, in addition to a need to catch up after Corona. That just sounds good. Because the economy is only catching up with the Corona period. Also, many of these jobs do not guarantee full-time employment, are often only temporary jobs and offer no security. Many highly educated people, but also employees such as truck drivers, left the British labor market with Brexit, including from the hospitality industry, the health and care sector, the meat processing industry, trade and agriculture. After the corona pandemic, high visa hurdles prevented her from returning. This had one advantage: these skilled workers were not entitled to unemployment benefits or other social benefits, which relieved the British state.

Over a million job openings have been open for months. Four-fifths (78 percent) of companies struggle to find employees, according to a survey by the British Chambers of Commerce (BCC) of 5,500 companies in the first quarter. Nevertheless, the British employment rate has not risen appreciably, standing at 75.5 percent recently, as it has in the past 30 years. And the number of people who are neither in nor looking for a job has recently increased as much as it has since registration began in 1971.

More and more people need social assistance

More and more people in Great Britain are dependent on social assistance benefits. However, this has not only to do with Brexit, the pandemic or the war in Ukraine, but also the so-called Universal Credit (UC), a hodgepodge of six state aid programs introduced in 2013. There are indications that the economic consequences of Brexit have also affected more people. Due to the catastrophic state of the health system, many are simply sick, unable to undergo surgery and therefore unable to work.

Between 2018 and 2021, the number of recipients rose from more than one million households to nearly five million – Corona certainly played a role here. In May 2022, there were still more than 4.7 million households, according to official statistics. The number of people in need has risen sharply, especially since February 2021. More and more people are also receiving supplementary benefits because their wages are insufficient.

The national debt seems to explode

Given the many negative effects of Brexit, it is not surprising that Britain has a very high public debt. This is one of the reasons why ex-Prime Minister Liz Truss’ debt plans drew such fierce criticism.

Going into big debt has been a part of everyday life in British politics for years. In 2015, they were still £1,664.70 billion. Last year, this amount had grown to £2,209.27 billion – so the debt-to-GDP ratio was 95.35 percent of gross domestic product.

The debt-to-GDP ratio has recently risen above 100 percent, in the corona year 2020. At that time, the state had more debt than there was in terms of economic output. The debt-to-GDP ratio was 102.61% of GDP, with a debt of £2,206.46 billion.

Assistance: Jurik Caspar Iser

This article was first published on Zeit Online. Watson may have changed headlines and subtitles. Here’s the original.