As a result of the pandemic, the majority of economic indicators in Britain are currently flashing red.
As a result of Russia's invasion of Ukraine, the difficult divorce process from the EU that has not been settled, and global supply chain obstructions impacting many different economic sectors, the outlook for the economy of the United Kingdom (UK) has worsened for both this year and the following.
In the wake of Boris Johnson's resignation, the new government will need to free itself from the spending restrictions imposed by the previous chancellor, Rishi Sunak, who is now the PM. This will allow them to alleviate the inflationary pressures placed on households and avert a possible slide into a recession by providing additional support for businesses.
The following is a list of the primary economic concerns that ministers will need to address.
Inflation
The consumer price index has increased from almost zero during the pandemic to 9.1 percent and is expected to top 11 percent by October when rising energy prices push average combined gas and electricity bills above £2,800 a year. This increase comes after the index dropped to almost zero during the pandemic.
The majority of analysts expect that the rate of inflation will begin to slow down in the following year; however, their predictions are contingent on the conflict in Ukraine coming to a conclusion.
In the year leading up to Russia's invasion of Ukraine, the price of a barrel of Brent crude oil nearly doubled, reaching $128. However, since then, it has fallen back, and on Thursday it was trading at $102.5.
GDP
When the economy of Britain was put on hold in April of 2020, the country experienced the largest drop in national income (GDP) since the beginning of the 18th century. It quickly recovered, but the rate of recovery slowed considerably this year as a result of the slowdown in the global economy.
Because it imports more than half of its food and the vast majority of its gas and oil, the United Kingdom is particularly susceptible to disruptions on a worldwide scale.
It is anticipated that the next official data for GDP, which will be for the month of May, will show a decrease for a third month in a row. The GDP of the United Kingdom is only 0.9% larger than it was in November of this year.
Tax burden
Backbench Conservative Members of Parliament are putting pressure on the government to abandon the plans of the Johnson administration to raise taxes on firms and people over the remainder of parliament in order to finance the costs of the pandemic response.
However, the potential for tax cuts is constrained, particularly in light of the fact that many Conservatives are simultaneously pressuring the government to raise the allocation for the military in response to the continued danger posed by Russia.
The potential of additional economic shocks, in addition to an ageing population, will further add to the pressure placed on the exchequer to provide additional funds.
UK trade
Charts comparing France and Britain's respective GDP to their respective trade values as a percentage of total GDP have been maintained for decades.
The global recovery from the epidemic that took place in 2017 raised all boats.
On the other hand, recent statistics have showed that Britain's trade has levelled out, whilst France's position has significantly increased. Many analysts point the finger at Brexit as the cause of the gloomier forecast for the UK.
The Institute of Export and International Trade reported in its most recent assessment that total export revenues across the UK dropped by 2 percent compared to the previous month. This "highlights the struggles that businesses are facing as a result of the pandemic, supply chain crisis, Russia-Ukraine conflict, and Brexit," the institute said.
Labour force in the UK
According to the most recent official forecasts, the United Kingdom will have approximately 1.2 million fewer workers in 2022 than was anticipated for the year 2019.
During the pandemic, a significant number of workers from the EU went back to their homes, elderly workers chose early retirement, and tens of thousands of students went back to school.
David Miles, the principal economic adviser for the Office for Budget Responsibility, stated that although it was reasonable to believe that the United Kingdom had experienced a permanent drop, which has led to sustained labour shortages in some industries, it was possible that some older workers and many students would return to the labour market.
Both Brexit and COVID have had the combined effect of reducing the number of people who are actively looking for job, which has driven up salaries and slowed recovery.
R&D spending
The amount of money spent on research and development has been decreasing, despite repeated assurances that this will change in the near future.
In the United Kingdom, the now-British PM Rishi Sunak proposed to boost expenditure on research and development from 1.74 percent of GDP to 2.4 percent of GDP at the time he was chancellor under Boris Johnson. Already, France spends 2.2 percent of GDP, while the United States spends 3.1 percent and Germany spends 3.2 percent. The chancellor had originally hoped to accomplish this by the year 2025, but at the beginning of this year, he moved the target year to 2027.