Distinguished countries · Britain | Reporter observation: Sunak "bet" on an early election, is the economic bottom card strong enough

2024-06-20 09:32 Xinhua Editor in charge: Chen Xi

Xinhua News Agency, London, June 19 (Reporter Zhang Yadong) After getting the economic data of the first quarter of this year, British Prime Minister Richie Sunak "gambled" on his future and announced that the election of the lower house of parliament would be held ahead of schedule on July 4. However, according to market analysis, the first quarter data shows that the British economy has slightly improved, which may be just an unsustainable "paper boom".

The latest economic data of April, which is not optimistic, seems to confirm this judgment. The British media generally believe that the ruling Conservative Party has been plagued by scandals and its support rate has been falling all the way. Sunak may be "lacking confidence" when he wants to play the economic card, and the Conservative Party's election is in danger.

Short rebound, followed by fear of weakness

According to the data released by the Office for National Statistics on May 10, the UK economy grew 0.6% month on month in the first quarter, the fastest growth in two and a half years. Not only did the gross domestic product (GDP) increase in total, but the UK's per capita GDP in the first quarter also increased by 0.4% month on month after falling for seven consecutive quarters. In vertical comparison, the growth in the first quarter means that the British economy has recovered from the technical recession at the end of last year; Horizontally, the growth rate of the UK economy in the first quarter exceeded that of major economies in the European continent, such as Germany, France and Italy.

For the Conservative government, whose "popularity" is as low as the economic situation in the past two years, the first quarter data is undoubtedly encouraging. Jeremy Hunt, the Chancellor of the Exchequer, said optimistically that these data showed that the British economy had recovered from the impact of the COVID-19 epidemic and was expected to continue to grow in the remaining three quarters of this year. In the next six years, the UK would be the best developed economy in Europe. Sunak also said that the first quarter data revealed the "real power" of the British economy. Over time, economic growth will benefit the people.

The economy has always been a key issue in British elections. Sunak announced at the beginning of last year that promoting economic growth was the government's annual work priority, but in the fourth quarter of last year, the British economy slipped into a technical recession (negative growth for two consecutive quarters); Last year, the economy grew by only 0.1%.

For the Conservative Party, in the past two years, it has experienced the resignation of former Prime Minister Boris Johnson due to the scandal of violating epidemic prevention regulations, and the hasty resignation of successor Elizabeth Trass due to the financial turmoil caused by the hasty introduction of tax reduction policies. Sunak has been busy dealing with high inflation, continuous multi industry strikes, the sequelae of "Brexit" and other problems since he took office, and his political achievements are not impressive. The improvement of economic data beyond expectations is a rare "bonus item". Sunak seems to have some reasonable logic to "strike while the iron is hot".

However, some media believe that Sunak set the election date in July instead of the autumn or winter as previously expected by the outside world. The tight schedule exposes a certain "lack of confidence": can the "rebound" momentum of economic data in the first quarter be maintained until autumn and winter? Now, it seems very uncertain.

Economic pressure is expected to be pessimistic

According to the data released by the Office for National Statistics on May 24, the retail sales of goods in March this year fell 0.2% month on month after correction; In April, retail sales fell 2.3% month on month. The retail sales volume is a leading indicator to observe the British economy, and the sharp decline on a month on month basis indicates that the growth of the British economy is still weak. Meanwhile, in the first quarter of this year, the UK unemployment rate was 4.3%, higher than that in the same period last year and the fourth quarter last year.

The latest data released on June 12 showed that the UK economy grew at zero month on month in April due to the sluggish retail and construction industries.

In addition, the Bank of England, the Bank of England, has repeatedly made it clear that the inflation data in the second half of this year will reverse the trend of continuous decline in the first half of this year, and the inflation pressure will rise instead of decline. This will enable the Bank of England to adopt a more prudent monetary policy, which is not conducive to economic growth.

In its economic report released in early May, the Organization for Economic Cooperation and Development predicted that the UK's economic growth this year would be 0.4%, lower than the previous expectation of 0.7%, and only better than Germany in the Group of Seven; The UK economy is expected to grow by 1% in 2025, ranking the bottom among the Group of Seven. The reason given by the OECD is that the sequela of the Bank of England's continuous interest rate increase has not been eliminated, and the uncertainty of when to adjust the interest rate policy is preventing entrepreneurs from making investment decisions.

The International Monetary Fund predicts that the UK economy will grow 0.7% this year. The agency believes that the British government has a very narrow space for tax cuts, with a fiscal gap of 30 billion pounds to be filled.

It's a long time to recover from illness

In the eyes of the opposition Labor Party, the British economy has been depressed in recent years, which is a major crime of the Conservative Party in power. Kiel Stamer, the leader of the Labor Party, criticized the Conservative Party for being in power for 14 years. Due to the lack of policy stability, industrial strategy and sufficient investment, the British economy grew at "the slowest rate in two centuries", and the growth did not benefit all the people.

Economists pointed out that from the outbreak of the global financial crisis in 2008 to the technical recession in the last quarter of last year, the British economy has experienced a "lost 15 years". The root of this is the outbreak of the structural "basic disease" of the British economy.

First of all, the lack of labor severely restricts growth. The business survey of the British Chamber of Commerce shows that nearly three quarters of British enterprises are facing "recruitment difficulties". This problem exists in 79% of the hotel service industry, 78% of the construction and manufacturing industry, and 72% of the retail industry.

According to the survey, 21.8% of the working age population aged 16 to 64 in the UK choose to leave the job market instead of working or looking for work. Tony Wilson, director of the British Employment Research Institute, said that there were about 500000 fewer working age workers than before the outbreak of COVID-19.

Secondly, the impact of "Brexit" on trade has not dissipated. Exports are one of the key drivers of UK economic growth, but the UK is still digesting the negative impact of Brexit. The EU is the largest market for UK exports. Since the UK officially "Brexit" on January 31, 2020, the relationship between the UK and Europe in terms of customs inspection, tariffs and supervision has still not been straightened out.

Karen Bates, CEO of the British Food and Beverage Federation, pointed out that the investment in the British food and beverage industry fell by one third last year compared with 2019, because it was directly related to the "Brexit". According to the Guardian, in the past three years, British exporters have paid 170 million pounds more than before "Brexit" in order to adapt to the EU market's regulation of British food.

The Budget Responsibility Department of the British Government predicts that the annual average growth rate of British real exports will be only 0.1% from this year to 2027; The trade volume is expected to stagnate in the medium term, and the trade intensity will still be lower than the level before the outbreak of COVID-19.

Third, there is a lack of "persuading" investment in industrial policies. Sunac announced last year that it would adjust its policy on the development of electric vehicles, further delaying the ban on fuel vehicles. In the face of the EU and the United States vigorously subsidizing the domestic clean energy industry, the UK has failed to provide relevant incentives. The British Chamber of Commerce and other industry organizations have called on the government to introduce positive industrial development policies to guide investment.

On May 22, 2024, British Prime Minister Sunak returned to the room after delivering a speech in front of the Prime Minister's Office at 10 Downing Street in London. Shen Jizhong

According to British media reports, about a week after Sunak announced the early election, more than 70 Tory MPs announced that they would abandon the election, which shows that "our people" lack confidence in Sunak's "gambling". Whether it is the political future of Sunak and the Conservative Party or the economic future of Britain, "uncertainty" is probably the only sure judgment.

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