UK economy’s mixed signal as labour, energy, and Brexit woes continue
Chancellor Jeremy Hunt says the UK economy is 'brighter than expected'
The economy has flatlined this month but will avoid a recession – as the UK returns to pre-pandemic levels.
Although February’s economic performance remained stagnant, the chancellor remained optimistic, stating that the overall economic outlook was “brighter than expected” and is on track to avoid recession.
Jeremy Hunt highlighted that the gross domestic product (GDP), which is a key indicator of economic growth, had expanded by 0.1% during the three-month period leading up to February.
The UK remains the weakest in the G7, which is made up of the seven most advanced economies which include the USA, Italy, Japan, Canada, France, Germany, and the UK. Which was originally formed in the 1970s as a forum for economic coordination among major advanced economies to address global economic challenges.
Glasgow Caledonian economy and finance lecturer Dr Patrick Ring said: “In terms of what’s happening in the UK, there are several things that have come together.
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“Compared to the US, for example, we have the same problems regarding labour, and the problems concerning the shortage of it, and that’s kind of pushing up costs.
“But what we don’t have is the energy problems. So on the other side of the coin, in Europe, they have the same energy issues some of the economies have labour supply problems, but not as much as the UK or as not as sharp as the UK.
“And then, of course, on top of the UK, we’ve got issues around Brexit. And despite what the government says there are costs to it, which are projected to be at least in the billions in terms of what it’s costing us.
“So, I think it’s those three things together that are causing particular problems for the UK. And it’s going to take longer for them to get out of this partly because of underinvestment in the economy.”
The Investment Monetary Fund (IMF) has predicted that the UK’s economy will shrink by 0.3% by the end of the year which will make it one of the worst-performing economies this year in the G20, which includes sanction-hit Russia.
He continued: “There’s a recent report out today as part of the IMF talking about the underinvestment that the UK government has made and the climate for investment isn’t very good at the moment.
“I think it’s going to be a long haul before we see any sunlight on the horizon.”
This comes as Tesco’s profits more than halved last year, and earnings before tax dropped to around £1billion in the twelve months to the end of February. It blames “unprecedented” rises in prices as inflation hits supply chains.
Zoe Gillespie, investment manager at RBC Brewin Dolphin, told the FT: “While profits are expected to be flat for the year ahead, the continuation of its share buyback scheme and strong execution of its strategy mean Tesco remains in good shape.”
