Boris Johnson will bring economic 'disaster' to his successor

In Britain, businesses and households are warning that they will not be able to survive the winter without government help. This will cause big problems for the new Prime Minister, Liz Truss. For a month, the UK has had a leadership vacuum as Britain plunges into a humanitarian crisis caused by a recession and rising energy costs.

Growth prospects deteriorated after Boris Johnson announced he would be leaving in July. Annual inflation is over 10% and food and fuel prices are rising. Hundreds of thousands of port, train and post office workers went on strike to protest the rising cost of living. Sterling fell to its lowest level in two years, its worst month since the 2016 Brexit referendum.

"It's just a series," said Martin McTague, chairman of the Federation of British Small Businesses. "I'm worried because I can't find good news."

Things can get a lot worse before things get better. The Bank of England predicts inflation will rise to 13% as the energy crisis deepens. Citigroup estimates UK inflation could reach 18% by early 2023, while Goldman Sachs warns it could reach 22% if natural gas prices "remain high at current levels".

Having served as Secretary of State, Truss is now the fourth Tory leader to announce an emergency intervention in 10 years.

The most pressing issue to address is skyrocketing energy costs, which will cause a wave of business closures and may force millions to choose between putting food on the table or staying warm this winter. Experts have warned that unless prompt action is taken, the cold weather will impoverish people and cause more deaths.

Truss told the BBC on Sunday that he would announce "significant energy issues" within a week. He added that a broader economic package would be available in a month.

Britain's oldest brewer, Jonathan Neame, said: "Everyone assumes this will be a quick and decisive announcement that will make the situation public or at least put people at ease." . "Otherwise, the person will be under a lot of pressure."

energy disaster

Household energy bills have risen by 80% since October to an average of £3,549 ($4,106) a year. According to experts, the basic price for a household could rise to 5,000 pounds ($5,785) in January and 6,000 pounds ($6,942) in April. Consumption growth after the Covid-19 lockdown will fall rapidly as people have to reassess their budgets. The Bank of England (BOE) has warned that the UK economy will go into recession in the coming months. Ben Zaranko, senior research economist at the Institute for Fiscal Studies, said: "The main problem with rising energy prices is that energy-consuming households, especially poor ones, will struggle to make ends meet." "This includes very large cuts in other areas of spending."

Meanwhile, Neam, which owns around 300 pubs in southern England, said business was panicking. They charge a crazy number on utility bills if they find a supplier. Nick McKenzie, head of pub chain Greene King, says energy costs at the place where he worked will rise by £33,000 ($38,167) a year. "It's disappointing for a lot of companies, especially those that have been weakened by the coronavirus," McTague said. "They're dealing with a new, once-in-a-lifetime disaster right now."

A fall in sterling could exacerbate the problem, making it more expensive to import energy and other goods and raising inflation. recurrent crisis

This is not the only reason why entrepreneurs and investors are worried. Vacancies fell in May and July but are still 60% above pre-pandemic levels. Finding staff for vacancies has been particularly difficult since Britain decided to leave the European Union. Around 317,000 more EU citizens live in the UK in 2021 than in 2019, according to the Office for National Statistics. Brexit will particularly hamper trade with Britain's biggest trading partner, the European Union. Long-term exports and imports will be around 15% lower than when the UK remains in the EU, the Office for Budget Responsibility predicts. UBS UK economist Dean Turner says the new prime minister should try to make the most of the UK situation without more chaos. But British lawmakers are still working to scrap a key part of Johnson's Brexit deal with the European Union, which could lead to a trade war with Britain's biggest export market. "Brexit has happened," Turner said. "What it is, we all have an opinion on that." "But we have to work to make it better, and I'm struggling to see if I have the drive to do it."

there is no easy solution

Truss, who took office this week, promised to boost the economy with tax cuts. But many economists fear that approach could fuel inflation, hurt fragile public finances and put money in the pockets of those in need. "The benefits of the [tax] cut go primarily to those who pay more," said Jonathan Marshall, chief economist at the Resolution Fund.