A note on UK's economic woes

28 Dec 2022 , 01:57 PM

UK’s economy contracted by 0.2% in the September quarter. GDP of the country at the end of September quarter was 0.8% less than the GDP in the December 2019 quarter. That was the last quarter before the crisis caused by Covid lockdowns struck. So, the GDP of the country has still not gone to the pre-pandemic level.

According to a data compiled by Bloomberg and The Economist, 86 profit warnings were issued by listed companies in UK in the September quarter. This is the highest number of profit warnings issued since 2008, when the global financial crisis struck. A profit warning means a company issuing a statement that its profits may be less than expected by the markets.

 Companies that sold to consumers are the worst hit by the economic crisis. High inflation rate coupled with declining economic growth has hit consumption spending in the country. Real income of people have gone down because of higher inflation. The decline in standard of living of UK citizens, because of this, is the steepest one ever recorded in the history of the country, according to the country’s central bank. 

Currently the people of UK are hit most by higher energy costs, higher food costs, and higher mortgage costs. Some of the higher energy costs are because of the ongoing crisis in Ukraine. Higher food costs are linked to both higher energy costs and the numerous supply chain disruptions caused by almost two years of Covid lockdowns. The higher mortgage costs are because of the central bank raising interest rates over much of this year, to control inflation. 

Indian companies that have exposure to Britain are likely to see adverse economic impact because of economic recession in Britain. These include a number of IT and software companies, besides those that export goods to the country.