Bye-bye Boris! Britain’s list of crises continues to grow…
Last week was yet another tumultuous one for the UK. Today, we’ll investigate what impact it’s already had on the island nation. After that, we’ll delve into the top fundamental events to watch out for this week. Shall we?
BoJo gets the boot
In case you live on Mars and missed it, last week UK PM, Boris Jonson, announced that he will be stepping down following insurmountable pressure from his cabinet and the parliamentary Conservative party. The Prime Minister’s handling of ethical scandals had been consistently placed under the microscope over the last 12 months.
The news was actually taken well by the markets. The pound traded higher, up 0.6% against the US dollar and up 0.4% against the euro, recovering slightly from two-year lows hit earlier in the week.
However, that little blip didn’t do much to paper over the cracks that the FTSE 100 was showing over the previous few days. It has, so far, failed to make up that ground, though it’s making good progress.
FTSE 100
Source: Google
Johnson also announced that he would remain at the helm in Downing Street until a successor is chosen. That process is now underway, with Rishi Sunak, Penny Mordaunt, and Liz Truss the leading contenders.
Just the latest in a long list of problems
This latest twist joins the impending recession, the war in Ukraine and dealing with fears over new sub-variants of Omicron on the list of issues facing the UK.
Whoever the new PM ultimately turns out to be, they will have to deal with all of that and tackle the following…
#1 The UK has the highest inflation in the G7
Brought on partially by the lingering impact of Covid and the supply shortages that have resulted from Russia’s invasion of Ukraine, food and energy costs have soared, helping to plunge the country into a cost-of-living crisis.
Annual average household energy bills could rise by a whopping 50%, up to £3,000 this winter. Rather scarily, these rising costs are being met with stagnating incomes. The Resolution Foundation has found that typical wages in the UK are no higher today than they were before the 2008 financial crisis. Perfect storm brewing?
UK inflation hit a new 40-year high of 9.1% in May and is forecast to climb over 11% later this year — eek!
#2 And nearly the lowest growth levels
The fifth-largest economy in the world effectively ground to a halt earlier this year, with all three major sectors of the economy — services, manufacturing and construction — going backwards. Retail is also floundering, as the public desperately cut back their spending due to those rising costs and stagnant incomes.
To make matters worse, the OECD last month forecast that the UK economy was heading for zero growth in GDP in 2023. That would amount to the worst performance in the G7 next year.
Crucially, this means that the next prime minister will have their hands tied, unable to make big tax cuts or spending pledges.
#3 While Brexit hasn’t exactly worked out… yet
How could we leave this one out? Aside from scandal after scandal, his ability to “Get Brexit done”, will likely be Boris’ ultimate legacy. We’re not sure he’d be too proud of that, though.
For many businesses, the tariff-free trade deal has done little but massively increase customs paperwork, making it harder for them to sell while also increasing the cost of their imports. Other trade deals have hardly been effective at this point.
The shadow of Brexit still looms large over the UK economy and a meaningful direction is sorely needed.
Looking at all of that, all we can say is — “Good luck, [INSERT NAME OF NEW PM]. You’re going to need it!”
Have your say!
Who do you think will become the next PM? Do you think they have what it takes to steer the UK to calmer waters? We’d love for you to let us know by tweeting us at @_Contentworks.
Top trading events this week
We should see quite a quiet week in the markets, here are the hottest events for your trading calendar.
Monday
● NZD — Inflation Rate YoY (Q2)
Tuesday
● GBP — Employment Change (APR); Unemployment Rate (MAY)
● EUR — Core Inflation Rate YoY Final (JUN)
Wednesday
● GBP — Core Inflation Rate YoY (JUN); Inflation Rate YoY (JUN)
● CAD — Core Inflation Rate MoM (JUN); Core Inflation Rate YoY (JUN); Inflation Rate YoY (JUNE)
Thursday
● JPY — BoJ Interest Rate Decision; BoJ Quarterly Outlook Report
● EUR — ECB Interest Rate Decision
Friday
● JPY — Inflation Rate YoY (JUN)
● GBP — S&P Global/CIPS Manufacturing PMI Flash (JUL)
Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.
The Contentworks team
