Britain’s outlook for economic growth was axed by the U.K.’s fiscal watchdog, following which a warning about the longest fall in living standards since records began 60 years ago for Britons is on course, was issued.
Compared to what the Office for Budget Responsibility had predicted for the economy in the month of March, the U.K. economy is now expected to be 42 billion pounds ($56 billion) smaller in 2022, said the Resolution Foundation said on Thursday. This was revealed after the OBR conducted a detailed analysis of the U.K. government’s latest budget and of the accompanying report that was issued by the OBR.
After taking into account the rates of expected inflation in the coming years, the Resolution Foundation said that it had calculated that wages would not be until 2025 at least that U.K. workers would see their wages returning back to the levels that they were used to before the pre-financial crisis levels of 2007. According to Resolution, between 2015 and 2020, there would an unprecedented fall in household disposable incomes for 19 straight quarters and for average annual pay, it is expected that it would be 1,030 pounds lower in 2022 compared what was forecast in March.
And as the uncertainty over Brexit still looming over the economy, the challenges that were faced by Chancellor of the Exchequer Philip Hammond, while releasing a budget on Wednesday, where he had very little room to bring in fiscal stimulus, and this challenge has been underscored by this latest analysis. And yet, despite the heavy challenges, there was some respite for housing purchases by the health service industry and for the first time buyers and for this he had managed to find some cash.
“Faced with a grim economic backdrop the chancellor will see this budget as a political success,’’ said Torsten Bell, the Resolution Foundation’s director. ‘’But that would be cold comfort for Britain’s families given the bleak outlook it paints for their living standards.’’
By the end of 2017, there would be a fall of 0.1 percent in the rate of productivity growth when calculated on a 10-year rolling basis, according to the forecast by OBR, the group also estimated. And hence the level of productivity that would be thus reached for the decade would be its lowest since Napoleon invaded Russia since 1812.
The post-Budget interviews that Hammond gave, acknowledged the problem. “The way to deliver higher real pay growth is to improve our productivity, there is no other solution,” he told the BBC.
“You can’t generate high wage growth unless you are being more productive and the way we do that is to invest in and encourage the most productive parts of our economy: The service sector, which is globally competitive, the high-tech businesses which are happening all over the U.K.”
(Adapted from Bloomberg)