The UK, fresh from divorce from the European Union with Brexit, it risks becoming the new Italy: this is what emerges from a report by the think tank Resolution Foundation, reported in some articles by Reuters and the Guardian.
In the analysis of the independent think tank we read that the country copes with a decade of major challenges, which could end up undermining the solidity of its economy, bringing it closer to that of Italy than to that of the engine of the European economy, namely Germany.
Among the challenges, there are certainly the problems related to Brexit and those that other European countries also have to face, such as theera post Covid-19, the transition to a zero-emission economy, an aging population and technological changes.
All this, while in the last decade the United Kingdom has been characterized by having suffered 1) the growth of slowest productivity in over 120 years; 2) mobility in the weakest labor market since the 1930s; 3) the strongest inequality than in any other country of the European Union, apart from Bulgaria.
In this situation, the report authors warn if there are no appropriate plans to overcome these vulnerabilities, the British GDP per capita will come closer to that of Italy, than to that of Germany, by the end of this decade.
“The UK is now facing a decisive decade, with the post-Covid-19 era, Brexit and the transition to net zero emissions of pollutants coming along with the major changes taking place in technology and demographics. This is much more important than the economy. Any failure to overcome these challenges would leave the nation divided and weaker, ”he stressed Clive Cowdery, founder and co-chair of the investigation “The Economy 2030” drawn up by think tank Resolution Foundation.
It is noted in the report that the country needs a new approach and that “what makes a new approach essential it is the magnitude of the change arriving”.
In addition to presenting the various challenges, the analysis also provides some clarifications:
- Covid-19: the result of the pandemic is that there are more people in smart-working (in the home working report): this means that the range of lifestyle choices that professionals can make has widened. But it also means that those who earn less will have to find a new job in new working environments.
- Brexi: the UK benefits from a newfound freedom of choice, but it also faces higher costs in its relations with the EU, which remains its main trading partner.
- Zero net emissions: decarbonization will create economic opportunities, but urgent action is needed. The UK will have to move from installing nearly zero heat pumps per year toinstall 3,000 of them every day, by 2030.
- Technology: the arrival of new technologies will improve but will also upset the standard of living. In this regard, the OECD predicts that one in seven jobs could disappear due to the automation process, over the next 15-20 years.
- Demography: the ratio of people aged under 20 or over 65 to those aged 20 to 64 will increase from 72% to 79% in the period from 2020 to 2030: this will be the faster change than in any other decade of the first half of the 21st century.
Finally, the report points out that, although the government of Boris Johnson has pledged to rebuild the country’s economy with various slogans “build back better”, “level up” e “global Britain”, no economic plan has yet been produced for the achievement of these noble objectives.
Some recently released macro data is worth mentioning:
In the first quarter of 2021, when the UK was in the grip of the his third lockdown, GDP fell by 1.5%, according to data reported by the National Statistics Office.
Although better than estimated, Britain’s gross domestic product – as Samuel Tombs, an economist at Pantheon Macroeconomics, pointed out to Reuters – has shown that the country has lagged behind other G7 economies for the fourth consecutive quarter. However, Tombs pointed out, it is possible that UK GDP will grow by 5% in the period between April and June. See also industrial production data.
The Bank of England predicts for UK GDP a recovery up to + 7.25% in the whole of 2021, at the strongest pace of growth fueled by the arms race ahead of the Second World War; that said, in 2020, the year of Covid and the lockdown measures, the British economy collapsed by 9.8%, reporting the strongest contraction in more than 300 years.