Why did the UK economy decline?

Data released this Thursday (22) by the UK statistics agency showed that UK economic output fell by 0.3% in the third quarter, compared to the previous three months. The previous estimate indicated that the reduction would be 0.2%.

The agency noted that the result places the UK economy in last place among the seven richest countries on the planet. Investment in local businesses also decreased by 2.5% during the quarter. But expectations were for a decline of 0.5%.

The British economy was still 0.8% lower than its level at the end of 2019 in the third quarter. In this regard, the previously estimated figure was 0.4%. In other words, half the drop.

In the third quarter, local authorities reported that the services sector expanded by 0.1%. But this performance was reversed by the negative performance of the industrial and construction sectors.

The failure of Britain's exit from the European Union

Brexit, the United Kingdom's departure from the European Union, in January 2020, has only made the British economy worse. This conclusion was expressed in an analysis published by the British newspaper in early December Financial Times.

The study's conclusions suggest that Brexit made families poorer, wages stagnated, companies reduced investment, and new trade barriers only harmed economic relations with the EU.

Bank of England Governor Andrew Bailey estimated that Brexit would cause a long-term decline in productivity levels of just over 3%. The reduction in the economy as a whole will be 4%. Another estimate indicates that the British economy in 2016 represented the equivalent of 90% of the German economy. Now that number has dropped to 70%.

Recent data is not encouraging either. The inflation rate reached 11.1% in October, its highest level in 41 years. As a result, the Bank of England raised key interest rates from 3% to 3.5% last week. This was the ninth consecutive increase in the index, which reached its highest level since 2008.