UK going into recession in less than two years: Former US Treasury Sec
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A former US Secretary of the Treasury criticizes the United Kingdom and lambasts its economic policies, saying the country is on the verge of a recession.
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Shoppers buy food in a supermarket in London, Wednesday, Aug. 17, 2022. (AP)
Brexit will be memorialized as a "historic economic error" that has damaged the UK's economy after having helped inflation surge, former US Treasury Secretary Larry Summers said.
The UK leaving the European Union led to higher consumer costs, and the country's economic policy has been for several years "substantially flawed", Summers said.
The former US economic chief underlined that Brexit "reduced the competitiveness of the UK economy, put downwards pressure on the pound and upwards pressure on prices, limited imports of goods and limited in some ways the supply of labor," which all culminated in higher inflation rates.
Summers also went all out on the Bank of England, holding it accountable for the surging inflation rates in the country, stressing that the country's Central Bank reinforced them through "very ill-judged monetary policies that were substantially too expansionary for too long."
He went on to highlight how the bank was on the right path to mitigating inflation, saying raising interest rates was required to cool red-hot inflation levels.
"Usually when you are prescribed a course of medication, even if the drugs are not so pleasant themselves, and even if they possibly have some side effects, it’s usually better to take the whole course of medicine, the first time it’s prescribed, than to stop taking the medicine early and wish a recurrence of the underlying infection."
Summer noted that he would be "surprised" if two years go by without the United Kingdom going into recession.
Inflation going nowhere
The United Kingdom's annual inflation rate fell sharply to an eight-month low of 8.7% in April with weaker energy prices, official data revealed on Wednesday.
The rate of price increases decreased from 10.1% in March, pushing inflation under 10% for the first time since August last year, the Office for National Statistics stated. "However, prices, in general, remain substantially higher than they were this time last year, with annual food price inflation near historic highs," noted ONS chief economist Grant Fitzner.
April's rate was above the Bank of England's (BoE) prediction for an inflation of 8.4% last month, despite the sharp drop. The annual inflation rate in April was also the highest in the Group of Seven rich economies, featuring Canada, France, Germany, Japan, Italy, and the United States.
As the UK government has said, it sees inflation dropping to about 5.0%, by year-end, while the BoE's target rate of 2.0% remains far off.
Additionally, official numbers show that the UK economy failed to grow in February, owing to the effects of public sector strikes and a drop in industrial production.
The Office for National Statistics (ONS) said in April that the growth rate remained constant in February, falling short of the 0.1% increase predicted in a Reuters poll.
Strikes catalyzing decline
Strikes by government officials and teachers slowed economic growth in February, according to Darren Morgan, head of economic statistics at the Office for National Statistics.
This is all going on as workers all over the UK are protesting against the falterting living standards.
Nurses throughout the UK in May went on strike as part of a protest action by the Royal College of Nursing (RCN) trade union, in what they call their greatest work stoppage to date, as the country's cost-of-living problem worsens.
The strike, described by the government as "incredibly disruptive for patients," lasted 28 hours, though the has agreed that nursing staff can be brought in for select crucial areas.
Members of the Unite union are striking at several NHS trusts and ambulance services in England after voting to reject the latest salary offer. Meanwhile, UK Health Secretary Steve Barclay slammed the RCN's strike decision as "premature" and disrespectful to other unions attending the meeting.
The refusal is a setback for the government, which had hoped for an end to the crippling health sector strike that has seen thousands of operations and appointments canceled.
