finds British economy He faces a complex equation: achieving the ambitious growth promised by the new Labor government, in exchange for the increasing burdens that restrict its ability to fulfill these pledges.
In this context, a report by the American network CNBC, viewed by the Sky News Arabia website, indicates growing doubts about the British government’s ambitious plan for growth and investment, with warnings of the possibility of imposing additional tax increases next year as well.
British Finance Minister Rachel Reeves last week announced a series of reforms, including reducing regulation of financial sector services and measures to boost pension investments, the latest changes in a series of initiatives aimed at stimulating the British economy.
According to the report, in theory, a higher rate of economic growth could increase government revenues without the need to raise taxes, because public revenues would be higher. However, the Labor government faces a challenge in keeping taxes at a sufficient level to fund deteriorating public services, while ensuring that businesses leave enough cash to invest and grow.
According to ING’s chief economist, James Smith, the government is walking on a tightrope in this regard, adding that if regulatory changes – whether in the financial sector or in other planning areas – do not stimulate the economy, there is a possibility of raising taxes again.
For his part, the Deputy Governor expressed Bank of England The former, John Grieve, expressed doubts about the ability of the reforms to stimulate growth, noting that both the easing of restrictions on financial services and the pension reforms were not “fundamental changes.”
“I think Reeves will need to take bigger steps to boost private investment,” he added, noting that planning and infrastructure projects are most likely to stimulate the economy.
This comes about two weeks after a huge budget announced by Reeves, which included a tax increase worth 40 billion pounds ($51.8 billion) and changes to public debt rules, measures that Reeves said were necessary to rebalance the large budget deficit. UK.
The independent Office for Fiscal Responsibility reported at the time that these measures were supposed to boost the economy in the near term, and strengthened its forecasts for economic growth in the short term, while lowering its forecasts for long-term growth. British GDP is now expected to grow by 1.1 percent in 2024, then 2 percent in 2025, before falling to 1.5 percent.
Impact of tax increases
However, many business leaders – who have been hit hard by the National Insurance payroll tax increase – have pointed out that Labour’s plans are likely to limit employment and discourage investment. A group of major UK retailers wrote to Reeves, warning that increased costs would be passed on to consumers as a result of the budget.
Constant pressure
In light of the increasing economic pressures on the United Kingdom, the CEO of the Corum Center for Strategic Studies, Tariq Al-Rifai, indicates that doubts about Britain’s growth plans have become more acute.
In exclusive statements to the “Eqtisad Sky News Arabia” website, Al-Rifai confirms that the British economy faces unprecedented challenges in the context of general economic weakness dominating Europe.
He explains that the current period is witnessing a slowdown in economic growth in conjunction with the pressures resulting from economic policies in USStressing that the expected policies of the US President-elect Donald TrumpThis pressure may increase, especially through measures such as raising customs duties (by 10 to 20 percent, and by 60 to 100 percent on… China In particular), the effects of which will be reflected in trade exchange between the United States and Britain.
A report by the British newspaper The Guardian stated that Donald Trump’s arrival to the White House makes UK policymakers think carefully: If he goes ahead with imposing comprehensive tariffs, the short-term impact, at least, is likely to be inflationary.
Al-Rifai points out that the economic indicators in Britain It confirms a larger decline than expected, with a relative rise in inflation rates, which constitutes an additional burden on the economy, which is already suffering from significant weakness in performance.
The annual inflation rate in Britain rose more than expected last October, recording 2.3 percent, compared to 1.7 percent in September, driven by the increase in energy prices.
- The British economy grew slightly in the third quarter of the year, registering a lower-than-expected growth of 0.1 percent, according to data from the Office for National Statistics.
- GDP also fell by 0.1 percent in September, also below expectations, after growth of 0.2 percent in the previous month.
Markets are now watching whether the government reforms will succeed in injecting growth into the slowing British economy.
Short-term optimism
As for the British economist specializing in the real estate sector, Jonathan Rowland, he highlighted the measures taken by the new Labor government, describing them as carrying short-term optimism.
In his statements to the “Eqtisad Sky News Arabia” website, he pointed out that the party presented ambitious plans for growth, but they require huge investments that cannot be achieved without careful management of borrowing from international markets.
Rowland points out that British companies are currently suffering from a significant rise in employment costs, which weakens their ability to compete, adding that Treasury Secretary Rachel Reeves faces serious challenges in managing the country’s financial resources. He continued: “It remains to be seen how these policies will bear fruit under the current circumstances.”
Sharp criticism
In addition, a member of the British Labor Party, Mustafa Rajab, talks about the deep criticism that his party directed at the ruling Conservative Party during the past years, explaining that the Labor Party has always raised the slogan of economic reform, which made voters pin their hopes on it, but he points out that the Conservatives were always wondering… : Where will the reform budget come from?
In his statements to the “Eqtisad Sky News Arabia” website, Rajab stressed that the options available to any government to achieve reform are limited, either increasing taxes, which may anger the people, or borrowing, which may push the economy to the brink of collapse.
While the Labor Party initially denied its intention to increase taxes, it acknowledged the necessity of borrowing, which strengthened its chances of winning the recent elections after a 15-year absence from power.
But these electoral promises collided with a complex economic reality, which forced the party to impose additional taxes, most recently on the agricultural sector, which sparked a wave of strikes among farmers. They were not the only ones, as they were joined by large segments of society suffering from poor wages and high costs of living.
He added: The economic challenges were exacerbated by Britain’s involvement in the war in Ukraine by supporting Kiev, and the huge financial burdens it entailed, adding: “In the midst of these crises, ambitious growth plans are no longer a priority for the British citizen, who has become focused on how to overcome the burdens of life.” daily.
