The UK economy is in trouble. The trade figures released by the ONS the other day - the ones Lord Frost used to claim that trade with the EU was at the highest ever level - showed the UK total trade deficit (EU and non-EU), sometimes known as the balance of payments, has widened in Q1 2022 to £24 billion, the highest since quarterly data started to be published in 1955. I can remember when these balance of payments figures were politically explosive - and they were just a fraction of what they are now.
The FT say that: "UK trade performance falls to worst level on record in first quarter" and in the article:
"Even when relatively volatile goods such as gold and other precious metals were excluded, the current account deficit still rose from an average of 2.4 per cent of GDP in 2021 to 7.1 per cent in the first quarter of this year.
"The gaping current account deficit largely reflects a record imbalance of imports and exports. However, there were also deficits in investment income and transfers of money between countries."
Lord Frost and others are still in denial about the consequences of Brexit and as things go downhill you can be sure they will continue to deny it all. Some mistakes are so huge the people responsible can never be honest about them and keep their sanity. Blair and Iraq comes to mind.
They will grow old comforting themselves that Brexit was the right thing to do but it was done in the wrong way by the wrong people. Communists in Russia - probably including Putin himself - still think like that.
However, Sterling is under huge pressure and yesterday briefly dipped into $1.19 territory before recovering to $1.2100 at the close. As someone pointed out , this follows five interest rate increases recently which seems to have no effect whatsoever. Sterling also dropped against the euro, ending on €1.1600 and the European Central Bank hasn’t raised rates once. The markets obviously don’t like what’s happening in the UK.
This is worrying but not altogether surprising.
Andrew Bailey, the BoE governor has said explicitly the UK economy is going to hit worse and for longer than other countries in Europe. Core inflation (excluding energy) is higher than in the big eurozone nations, will persist for longer and growth is being strangled here because of chronic labour shortages and impediments to trade.
The impact of Brexit on trade is beginning to show as the ONS figures prove beyond doubt. Since the referendum the pound has slumped by at least 15 per cent and in the last 12 months it’s gone from $1.3963 to €1.2100 a fall of 14 per cent in itself, yet real exports are down and imports are up. This shouldn’t be happening. It should be the reverse.
When a currency falls, it should make your products cheaper abroad and imports more expensive. We are doing the reverse.
In fact, looking at ‘real exports’ ,they are down 4.4 % on the previous quarter as the figures show. Real exports are calculated by reducing the current price by a deflator which is indexed to inflation. This is because exports at current prices increase anyway simply because they’re more expensive than previously, not because we're exporting more.
To get to the underlying amount of goods you need to take account of inflation as Moodys have done with these figures.
No, I'm afraid we are heading into seriously choppy water with a whole host of problems including the NI protocol row, the war in Ukraine, covid infections rising again and sleaze at the highest level enough to sink a battleship.
In Westminster, a deputy Conservative chief whip has had the whip withdrawn after he resigned his post following an assault on two men while he was absolutely blind drunk. It turns out that Chris Pincher has resigned once before and was known among his colleagues as a***e Pincher, yet Johnson for unfathomable reasons, appointed him to the whip’s office.
It doesn't surprise me that nobody is sticking their heads above water in the Tory party as potential candidates for the leadership when it becomes vacant soo. You would be mad to want to do it at this time.
Only Liz Truss is sufficiently stupid enough to try.
