Is Brexit shaking the U.K's economy? 📉
It is neither the pandemic effect nor the energy crisis effect. These are very clearly the Brexit effects 🔨
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It has been a while since we met.
Today's read is a narrative on how Britain's exit from the European Union is crushing them in terms of prices, investments, and trade. It's neither covid nor the energy crisis (Russia-Ukraine war) to blame for the upcoming recession, but Brexit. This single bill has created ultimate chaos within the people of the United Kingdom. The British Pound just hit an all-time low last month. Inflation has shot up the cost of living and it's just the start. The economy is expected to be in recession until the middle of 2023 and the next two months will be the most crucial months for Europe.
Let's start from the very beginning.
Who do I call if I want to call Europe? 💭
The answer to this is European Union.
The European Union is a political and economic union of 28 European countries, Ahh!! 27 now. It stands together as a single entity to the world and internally has made many relaxations among the countries as to trade, travel, invest, currency exchange, and whatnot.
If I make olive oils in Italy and I want to sell them in Ireland. So there won't be any tariff charges on the borders and there won't be any import/export tax imposed by the countries involved in between (compare this to you buying gadgets at the same price in Dubai and India). The European Union gives you a huge market to build on your business. The cons of being a team member of the EU is to accept the collective decisions taken by the team irrespective of country’s personal gain or loss.
Why Britain took the Exit then? 🚩
The European Union asked all the countries to take in immigrants according to their current population ratio which somehow created a sense of fear among the natives of the country.
There was a fear of unemployment, a higher crime rate, and a lower standard of living in the country. But they didn't have any option but to accept the terms. The other reason was the difficulty to trade and have an agreement with anti-EU nations like China.
Anyways the United Kingdom thought that they were contributing more to the European Union and it was of no use to them (pity). The politicians took Brexit as propaganda and demanded an open referendum to quit the union.
Catastrophe ☢️
After Brexit, the exports didn't go up and the imports became expensive resulting in a raised inflation of 2-3%. The pound-sterling was at the lowest and everything that was costed in dollars around the world is now more expensive. It became hard for small-scale businesses to compete with other countries as there were tariff barriers, import/export duties, and delays in logistics.
Plus Russia is single-handedly choking all the countries of Europe who are supporting Ukraine by shortening the gas supply. The United Kingdom is being hit the worse.
Let's oversimplify this, Suppose I was buying 1 kg of Natural gas at 10 Pounds (around 14 USD), now the value of the Pound is tanked which means to buy the same 1 kg of Natural gas I'll have to pay more, say 12 Pounds (around 14 USD). Now the catch is the prices have gone up by 4 times (thanks to Russia) which is 14*4=56 USD and as the local currency is drowning it will be around 48 Pounds (It's like you buying petrol at ₹500 per litre in India).
These numbers will increase because Winter is coming and energy consumption will skyrocket.
Bad Politics
The Conservative Party (Right wing party or the B.J.P of U.K) raised this issue to win the elections and now they are just living up to their promises. The Party cannot blame Brexit, so they follow the loop of blaming covid, the queen's death, and Russia. They cannot subsidies energy bills because it will shed their foreign reserves and no one knows how long this war will be. The government has already changed 3 Prime Ministers this year.
Rishi Sunak is to the rescue now.
Rishi Sunak is the richest politician in the United Kingdom with more wealth than King Charles III (It's like Ambani being the Prime Minister of India).
Thank You
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Ciao
Nishchal from Team Rubric