The worst-performing economy in the G7 will continue to hurt retail sales

Yes, it’s the UK. There is little optimism to be taken from any of the figures on GDP and inflation. UK gross domestic product (GDP) fell by 0.2% between July and September, driven in part by a drop in retail sales, according to the Office for National Statistics (ONS. And the November 17 budget merely confirms that there will be no growth for 18 months. And in fact, with higher taxes on business, it is hard to see how growth will suddenly take off again after mid 2024.

We are the only economy in the G7 with negative growth, and retail is included in that, and we are also experiencing higher inflation than most countries in Europe. Brexit is hidden in those figures but neither the Government nor most of the media wants to acknowledge that. In fact, Brexit is estimated to have had a much greater impact and will lead to a fall in GDP of 4% compared to Covid at 2%. The value of this fall more than covers the savings that the Chancellor is trying to find and the interest payments on our debts. As a result, the economy will shrink in 2023 by 1.4% and by 2% across the whole period of the recession to mid 2024. By contrast, the Eurozone economies will grow by 2.6% in 2022 and shrink to between 1 and 2% in 2023.

Contrast this also with the US where, counter to expectations, retail sales held up well, up by 1.3% in October, despite inflation, and the economy as a whole is expected to grow by 4.6% for 2022 but fall to 2.7% in 2023. Inflation will apparently fall to just under 3%. A figure this low is unlikely to be repeated in the UK which may see inflation rise to 13% in early 2023 and then fall, but the UK will still have the highest inflation in the G7 until 2024.

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