As the COVID-19 pandemic subsides, the economies of seven major countries (G7) are slowly recovering, but the U.K.'s growth rate is dropping to negative, facing the worst recession among developed countries. In the third year of Brexit, the U.K. is in deep trouble. It is the result of a combination of populism by political leaders who downplayed the economic impact of exiting the E.U. and delays in structural reforms to revive the nose-diving economy. The British lament that “the problems intertwined with the British economy have been imploded all at once.”
The U.K. economy is expected to escape negative growth next year barely. Investment bank Goldman Sachs has projected a 1.2% decline in Britain's gross domestic product (GDP) this year, which is in line with projections for Russia's economy, which is at war with Ukraine. The Bank of England has already warned of “the longest recession in 100 years.” Inflation is skyrocketing due to rising energy prices and reduced trade with mainland Europe. Due to soaring electricity rates and a cut in consumers' real income, the number of self-employed business closures increased by 50% in one year. The market capitalization of the London Stock Exchange, which has maintained a No. 1 position in Europe, was overtaken by France for the first time.
The fall of the U.K. demonstrates how fatal political circles catering to fickle public opinion and government policy failures can be. The British Conservative Party promised a referendum on leaving the European Union for power, but in 2016, when Brexit was decided contrary to expectations, it could not cope properly. Before Brexit in 2021, institutional improvements such as fiscal and tax policies, expansion of growth engines to revive the manufacturing industry, and supply chain reorganization were needed. Nevertheless, there was not enough preparation, and after the Brexit decision, five prime ministers exacerbated policy confusion with inconsistent solutions.
The situation the Korean economy is facing cannot be said to be lighter than the problems the U.K. is experiencing. The export-led economic model itself, which has helped Korea reach the threshold of an advanced country, is being threatened by the conflict between the U.S. and China, “bipolar globalization” caused by the war in Ukraine, and intensified protectionism. Still, the government and politicians remain divisive without agreeing on the passage of a bill to support businesses entering the global economic war zones. Fiscal rules to rigorously manage national debt in case of emergency are not even discussed in the National Assembly. We must put our heads together to devise ways to turn the economy around before contracting a serious disease that is difficult to find a cure for, as illustrated in what is ailing the U.K.