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The UK plunges back into economic pessimism


Brexit, low productivity and the deterioration of public services revive the ghost of the "sick country of Europe"

A ghost haunts the United Kingdom once again.

Pessimism in the face of a declining economy.

It has already happened two other times throughout its history.

At the end of the long Victorian era, when the United States or Germany reached their industrial development and ended their competitive advantage.

And after World War II, when the Allied nation that led the victory over Nazism was barely managing to raise its head as Western Europe rose strong from its ashes.

“Brexit has frozen growth.

Now we are forced to do much more, just to stay on our feet.

But it is impossible for us to grow, because there are simply no staff.

The only thing I can do is retain the ones I already have at all costs and, logically, increase their salary so that they don't take them from me”.

Sergio Dionisio, 44 ​​years old,

He is a Portuguese who began his business adventure in London in 2006.

They were the last throes of the glorious decade of Tony Blair's New Labor, which was brought to a halt by the 2008 financial crisis. Innovation and the development of new job skills boosted the country's productivity like a rocket during those years.

StarPlus Services

, Dionisio's company, grew every year between 40% and 50%.

It started with cleaning and maintenance tasks in offices and administrative buildings.

Today it controls the integral management of many of these complexes, both in England and Scotland.

“The problem is that to expand the business I resorted to subcontractors.

And those companies cancel my contracts overnight, because they are incapable of recruiting the necessary personnel.

Something has to change, because if things continue like this we are headed for disaster, ”he complains.

Sergio Dionisio, owner of StarPlusServices, in his London office

It would not be entirely correct to blame Brexit exclusively for the economic situation in the United Kingdom.

The pandemic, the supply chain crisis, the war in Ukraine or accelerated inflation —with the increase in the price of money— have also affected many other countries.

But the exit from the European Union and the renunciation of its Internal Market help to explain, or aggravate, particularly acute and genuine British problems such as: the shortage of manpower, the weak productivity registered for more than a decade, the lack of business investment, the stagnation of wages, the setback in the opening of its international trade or the deterioration of some public services that has resulted in a wave of strikes as has not been experienced for half a century.

Two irrefutable facts.

The UK is the only country in the G-7 – the seven most advanced economies in the world – that has not returned to its pre-pandemic level.

In fact, according to the OECD, it is the only one that has decreased since the end of 2019 ―the latest data available, that of last November, points to 0.1% growth―.

And since March of that same year, with the calculations made by the Center for European Reform (a pro-EU British think tank, but with a critical vision of its institutions) based on the work of the National Statistics Office, The British labor market has lost 460,000 workers from the European Union, which it has not been able to compensate with the barely 130,000 that have joined its economy from other parts of the world.

All those that Dionysus could dispose of at the moment,

"I think this problem has two very different faces," Paul Johnson, director of the Institute for Fiscal Studies, and one of the most sought-after voices in the British public debate, explains to EL PAÍS for his lack of objectivity and honesty. in a highly polarized climate.

“There are industries that clearly do not require high job training, such as food processing plants, fruit and vegetable picking, or the hospitality sector.

For a long time, they have depended on imported labor for their operation.

It is not a matter of training, or skill development.

It's more of a question of availability”, Johnson responds to the somewhat tricky argument shared by both the Conservative government and the Labor opposition.

Both shy away from the employers' request to make the granting of work visas more flexible, because in pre-electoral times they do not want to stir up the specter of immigration.

Both the Prime Minister, Rishi Sunak, and the leader of the opposition, Keir Starmer, promise that they will fill all these gaps by training the British unemployed.

“We have a very aging population.

If we want the same services that we have enjoyed up to now, we are going to have to import labor.

In reality, the relationship between immigration and the economy is very coherent, but it is rarely exposed properly”, argues Johnson.

Brexit and political instability

What was before?

Did political instability bring Brexit or was it its consequence?

In any case, of the experts consulted by EL PAÍS for this chronicle, Johnson is the one who most clearly points out the relationship between the "Italianization" of the United Kingdom, in relation to the continuous government crises, and its economic decline.

“Political instability has played a role.

And it is closely related to Brexit.

We already know how badly Italy did for a long time, and it had a lot to do with its political deterioration (...).

We had long-term structural problems, but if you look back at 2015 and 2016, things were starting to pick up.

Until the referendum [on leaving the EU] came.

We had had a few years of poor economic growth, but it seemed that trade and investment were beginning to pick up,

Old evils and new evils, the sum necessary for a perfect storm.

Along with this deterioration in political stability —within the country, but also in its relations with the rest of the world, especially with Brussels—, the most tangible consequence of Brexit is the deterioration of foreign trade.

“It has complicated everything for us.

In paperwork and in times of delay.

And in costs, of course.

Everything has worsened”, says José Sol, 50 years old.

He arrived in the United Kingdom thirteen years ago wanting to conquer the world.

Few can claim to be the official pata negra ham cutter at the

Royal Enclosure,

the venue reserved for members of the English royal family and their guests at the legendary Ascot horse races.

Your business of importing the highest quality Spanish hams,

Spanish Ham Masters

, and the spectacle he puts on every time he or his cutters get down to business, has captivated high-net-worth customers across the country.

“A few years ago”, continues this Spanish businessman, “I ordered a ham from Spain and had it the following week.

Now, in the first place, many Spanish companies have given up sending it because they do not have their export papers in order.

I am forced to order whole pallets to make it profitable.

And the waiting time is much longer.

In total, the entire process has become 60% more expensive.

And it is not solely the fault of the pandemic or the war in Ukraine”, complains Sol.

José Sol, owner of Spanish Ham Masters, jokes during his work for the Royal Ascot races.

"The UK's trade openness [which measures a country's ability to transfer goods and services with the rest of the world, through the ratio between imports and exports and GDP] has fallen significantly compared to other countries," says Sophie Hale, chief economist at the

Resolution Foundation

, one of the most progressive-oriented British think tanks, focused above all on analyzing inequality.

Her recent study,

The Big Brexit,

it points to an 8% drop in trade openness between 2019 and 2021. The worst figure of all the advanced economies in the world.

“It is clear that there was no reason for us to think that the pandemic was going to affect the United Kingdom more than any other country.

Now, everything is beginning to become clearer, the effects of the coronavirus dissipated.

Among the reasons why the country's economy is performing well below those of the rest, Brexit is a clear factor, as it was before the pandemic, ”says Hale.

Salaries and public services

If the average salary of British workers had continued to grow at the level before the financial crisis, the team of economists at the

Resolution Foundation

has calculated , they would now get about 334 euros more a week, and about 17,000 euros more a year.

Economy Minister Jeremy Hunt announced late last year cuts in public investment.

They were part of the emergency tax plan to recover the credibility of the United Kingdom, after the debacle that caused the historic increase in taxes by the failed Government of Liz Truss.

This reduction implied that real wages would not recover their 2008 level until 2027. Almost two decades of freezing, especially aggravated for public employees, subjected to increasingly unbearable job stress.

The wave of strikes that the country is suffering ―nurses, ambulances, public transport, postal service, teachers or customs service― responds exclusively to the demand for a salary increase by some public employees whose real salaries are 4.3% less than those they had before 2008, added to a current inflation of 9.3%.

The elephant in the room

Businessmen, citizens and experts have begun to speak clearly and openly about the shot in the foot caused by Brexit.

Two thirds of Britons, according to the most recent polls, are already in favor of holding another referendum to reconsider the decision to leave the EU.

They do not agree on the date, because the division and viscerality that this debate introduced among citizens leads many of them to want to wait a few years and for the wounds to heal.

However, it is the politicians who refuse to talk about it.

They dodge as they can the elephant in the middle of the room that the rest see with absolute clarity.

The Conservative government does not stop promising that it will fully exploit the "liberties won" with the exit from the EU, without clarifying what it means.

Labor, in whose memory the defection of almost 30% of their voters, who succumbed to Boris Johnson's anti-European populism, still lives on, have surrendered to the alleged evidence.

They do not stop repeating, starting with their leader and candidate, Keir Starmer, that re-entry into the EU, a return to its Internal Market or its common customs area, or the recovery of the freedom of movement of people that allowed the arrival for years of community workers.

“But we want a relationship with the EU that is very different from the one the current government has.

We want an agreement between partners, not a continuous confrontation.

We do not want to constantly exploit the division to obtain internal political advantages”, highlights Nick Thomas-Symonds, the Foreign Trade spokesman for the Labor Party, to EL PAÍS.

"What we are saying now is that to regain control [of the country], the important thing now is to focus on improving life in different parts of the UK and making Brexit really work."

That is the strategy of Labor, which the polls predict a comfortable victory in the next elections.

That, however, is almost two years away.

Meanwhile, both the government and the opposition limit themselves to repeating similar mantras —fiscal responsibility, commitment to innovation, green economy,

The Governor of the Bank of England, Andrew Bailey, this week gave some signs of optimism before the House of Commons.

The UK appears to have rounded the inflation curve, which, like the rest of Europe, has started to decline, and the recession announced for 2023 and part of 2024 may be milder than the monetary institution originally anticipated. .

Temporary consolation for a country whose structural economic ills, like the dinosaur in Monterroso's story, will still be there when it wakes up from the Brexit nightmare.

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Source: elparis

All news articles on 2023-01-22

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