Energy crisis and spiraling inflation are crushing UK economy, bank analyst says
The UK is “looking more and more like an emerging country”, Saxo Bank’s head of macro analysis, Christopher Dembik, said in a research note on Monday, CNBC reports. The analyst pointed to political instability, trade disruptions, an energy crisis and soaring inflation as the main indicators behind this.
“What Brexit did not do on its own, Brexit coupled with Covid and high inflation managed to do,” Dembik wrote. “The British economy is crushed.”
According to him, the only thing keeping it from being called an emerging market is a currency crisis, with the pound holding its own despite all the macroeconomic headwinds.
“It’s only down 0.70% against the euro and 1.50% against the US dollar over the past week,” he said. “Our bet: having weathered Brexit uncertainty, we don’t see what could push the pound into a tailspin.”
However, the Saxo analyst also suggested that all signs indicate that the country’s economy will suffer further. He cited new car registrations – which are often seen as a leading indicator of the health of Britain’s economy – which is believed to have plunged 14% year-on-year last month to 1.528 million from 1.835 million in July 2021.
UK sets new record for inflation-linked cash withdrawals
“This is the lowest level since the late 1970s,” Denbik noted, adding, “The recession will be long and deep. There will be no easy escape. This is very worrying, in our opinion. The Bank of England estimates the crisis will last with GDP still 1.75% below current levels by mid-2025. »
The Bank of England warned last week that Britain’s economy will enter its longest recession since the Great Financial Crisis later this year, with economic output shrinking every quarter from the fourth quarter of 2022 to the fourth quarter of 2023. The surge Natural gas prices are likely to push consumer price inflation to 13.3% in October from 9.4% in June, the bank forecast.
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