In the United Kingdom, Rishi Sunak faces “deep economic difficulties”

Monday, October 24 had barely begun. Rishi Sunak was not yet officially the leader of the Conservative Party – and therefore the new Prime Minister of the UK – but from the BBC morning radio came a stark reminder of the extremely delicate state in which he finds the British economy. . Guy Hands, a long-time Tory backer who heads Terra Firma, a venture capital firm that manages businesses worth €51 billion, was being interviewed, and he didn’t took gloves. “The mistakes of the past six years that have put the UK on track to be the sick man of Europe must be corrected. »

According to him, it is imperative to renegotiate Brexit »otherwise, “we will see taxes gradually increasing, social assistance and public services gradually declining, and in the end, an IMF bailout like in the 1970s”. He was referring to the intervention of 1976, when the International Monetary Fund had to release what was then the largest rescue plan in its history.

Double crisis

This dark scenario is far from certain, but the United Kingdom is clearly going through a dual political and economic crisis. With three Prime Ministers and four Chancellors of the Exchequer since early July, political instability is obvious. On the economic side, the onset of financial panic caused by the budget presented by Liz Truss has thrown a harsh light on the serious weaknesses of the moment. The pound sterling had fallen to its lowest level against the dollar and bond interest rates had jumped. It took the intervention of the Bank of England, the cancellation of a large part of the tax cuts promised by Mme Truss, and the appointment of a new Chancellor of the Exchequer, Jeremy Hunt, to calm the markets.

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In his very short speech after his victory, Mr. Sunak himself acknowledged the magnitude of the task. “The UK is a great country but there is no doubt that we are facing deep economic difficulties. » He faces a tight schedule. The new budget, with the presentation of the major budgetary balances, is expected from Monday 31 October. This date had been chosen by Mr. Hunt before the resignation of Truss, and it looks like Mr. Sunak wants to stick with it.

This crisis situation is not unique in any respect to the United Kingdom. All of Europe is affected by the difficulties linked to the pandemic and then to the war in Ukraine. The surge in gas prices this summer, following the cut orchestrated by Russian President Vladimir Putin, further accentuated the slowdown suffered by the entire economy, in particular the industrial sector. Inflation in the euro zone, at 9.9%, is comparable to that of the United Kingdom, at 10.1%.

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