Boris Johnson agrees to step down: latest UK news

Credit…Andrew Testa for The New York Times

Boris Johnson was forced to step down from the leadership of the country at an incredibly dangerous economic moment, leaving behind a bleak outlook and an uncertain Brexit legacy.

On Thursday afternoon Johnson described his resistance to resigning “when the economic situation is so difficult”.

This became a period often compared to the 1970s in Britain, an era of stagflation when the economy contracted, inflation skyrocketed and vital services were brought to a halt by massive strikes. The UK is not yet repeating this stagflationary era, but there is a threat.

Inflation in the country reached the annual level 9.1 percent, the highest in four decadescaused by disruptions in the supply chain due to quarantine due to the pandemic and the war in Ukraine. And price pressure continues to mount as companies begin to pass on increased costs to their customers and workers demand higher wages to cope with the rising cost of living.

Households are facing the worst decline in living standards in generations because wage growth has not kept pace with inflation, which is not expected to peak until at least the fall, when a price cap on household electricity bills is set. above. Household disposable income, adjusted for inflation, is expected to fall by more than 2 percent this year.

According to Oxford Economics, this is the worst figure since 1945.

“This is a really tough time for a lot of people,” said Andrew Goodwin, chief UK economist at Oxford Economics. For low-income households, “it will get worse because the things you spend the most on – food, gas, energy – rise in price the fastest. So their inflation rate will be even higher.”

With wages lagging far behind inflation, workers went on strike, which prepared Britain for a summer labor turmoil. Recently, train workers and criminal defense lawyers have quit their jobs, and medical workers, school teachers and postal workers are among those threatening to strike in the coming months.

Anxiety and anger reflect the pain experienced by many households. mr. Johnson and his former chancellor, Rishi Sunak, who stepped down on Tuesday, tried to ease some of that burden in May when they announced another round of living wage payments and account cuts. But hardship was already widespread among low-income households who were unable to accumulate savings during the pandemic. The use of food banks has increased during the pandemic, even before the latest spike in inflation.

mr. Johnson’s departure leaves significant uncertainty about the government’s next steps to overcome economic difficulties. This may delay the presentation of the next budget, which determines spending and tax decisions. For investors and economic analysts, the key question is what is the future of fiscal policy and whether the new chancellor, the UK’s chief finance officer, will reverse the previous chancellor’s tax hikes for many workers.

While many of the economic shocks that are hitting the UK right now, such as the energy price hike, are also being experienced by other countries, the outlook for the UK is particularly bleak.

“These shocks are exposing deep-seated problems that have been around for some time and are making the economy much more precarious than it might otherwise be,” said Jagjit S. Chadha, director of the National Institute of Economic and Social Research.

The research institute expects little economic growth in the UK this year and next, exacerbating the long-standing problem of unequal distribution of wealth and income. At the same time, Mr. Chadha said Brexit was a “slow blow” for the UK economy, slowing growth as trade barriers were erected, European Union citizens exited the labor market and political uncertainty discouraged business investment.

“This is not a very attractive picture that I paint,” said Mr. Wilson. Chadha. “But this is the legacy of whoever becomes the next prime minister and the cabinet that comes with him.”

Andrew Bailey, Governor Bank of England said last month that the British economy “probably weakened earlier and somewhat more than others.”

To combat inflation, the central bank has been raising interest rates since December, bringing them to their highest levels since 2009. A further boost has become more uncertain as policymakers struggle to strike a balance between containing inflation and the risk of a recession. Oxford Economics predicts that the British economy will stagnate next year.

mr. Johnson’s economic agenda was an attempt to “level” the country in a grand plan to reduce regional disparities. But for many analysts, the plan fell through due to a lack of specifics. His oft-stated ambition to build a “high-wage, high-skill, high-productivity economy” was delivered by words but not policy action, they said.

“Of course, there are some good slogans, but there are no huge achievements behind them,” Mr. Goodwin said. “There are many such politicians, they were, these were ideas, then nothing followed. There was no delivery mechanism.”

One of Mr. Johnson’s proudest achievement was “getting Brexit done.” But somehow the process is still mired in conflict Ireland, mr. Johnson’s Brexit legacy remains uncertain as the economic benefits of leaving the European Union slowly materialize.

For many industries, including farm work, construction and hospitality, the legacy of Brexit is a smaller workforce, causing business to slow down. For small businesses exporting to the European Union, Brexit brought additional costs and bureaucracywith no apparent benefit. Trade barriers have also worsened food inflation, economists say.

“We have a world where technically we have left the European Union, but we have not replaced it with trade agreements that could promote better growth than it would otherwise,” Mr. Chadha. “We didn’t really Brexit the way people said we would.”