Rishi Sunak says we are facing a “profound economic crisis”. Big words, not to mention depressing. But do they really stack up?
Is the UK really facing something unique? Can he really blame much of it (as was implicit in his speech) on his predecessor? Or is something else going on?
Let’s start at the start.
There is no doubt that the UK is facing tough economic times right now. We are quite plausibly in the teeth of a recession. Look at measures like the purchasing manager’s index from S&P Global – a measure of how businesses are faring right now – and it is contraction territory. This is a recession warning, and no mistake.
And there are certainly some factors which will make this a grim year or two for households. For one thing, mortgage costs are rising, and rising fast. The average two-year fixed rate mortgage is currently up above 6%, a level which implies the highest repayments as a percentage of household incomes since the late 1980s or early 1990s. This is clearly not good news.
And it’s a similar story for energy bills. Even after you account for the energy price guarantee introduced by Liz Truss, the amount the average household spends on energy this winter will still be the highest we’ve seen since at least the 1950s. Again, not good news – and note that since the scheme has been shortened from two years to six months, it’s quite plausible the costs are even greater next year.
Put it all together and any measure of our collective standard of living suggests an astonishing fall this year. We are all going to be much poorer, relative to what we typically want to spend our money on. And that, in large part, is down to the impact of higher energy prices, which creep into every part of our lives.
But these are not the only issues facing the government.
The UK is not the only major economy facing a potential recession
One…
Source : skynews
