Economists note that the UK economy will go through a rough patch in the near future. The Bank of England estimates that the country is on the verge of a devastating crisis. The British regulator has recently increased the key rate to 3%. At the same time, the officials expect the looming crisis to be fiercer than the one that occurred in the 1930s. BoE Governor Andrew Bailey suggests that the country’s economy has been hit by damaging shockwaves in the last two years. New British Prime Minister Rishi Sunak confirms that the authorities are preparing measures to curb raging inflation, describing it as “indeed the enemy.” Currently, the government’s budget lacks £50 billion to weather the storm. Economists say that this amount can be gained by cutting expenses and increasing taxes. Meanwhile, small and medium businesses are under threat. Across the country, many companies may close as they are unlikely to withstand inflationary pressure and soaring energy prices. According to preliminary forecasts, 60% of businesses may shut down soon. A diminished gas supply is another headache. Earlier, the government decided to suspend Russian gas imports. This measure will take effect in January 2023. The International Energy Agency (IEA) believes that if the UK completely ceases supplies from Russia and increases imports from Asian markets, Europe is highly likely to face an energy shortage. This is possible in the second half of next year, the IEA stresses. Many analysts say that one-fifth of the country's households is in fuel poverty. The poorest British citizens spend about 10% of their income on electricity and heating. Against this backdrop, Rishi Sunak is striving to find additional funding sources for the state budget and save social spending. However, the current prime minister's weakness is that he is trying to avoid any mistakes, fearing to follow the steps of his predecessors, who left office before the end of their term. Currently, Sunak’s government is planning to increase the tax on excess profits of energy companies to 30% from 25%, and to extend this law until 2028. At the same time, the new British Prime Minister is not taking instant decisions, analysts note. Sunak sets ambitious goals and knows how to achieve them. The main one is to win back the trust of voters and businesses. However, this goal is likely to be difficult to reach. According to experts, the current economic and political environment is putting pressure on Sunak. Nevertheless, PM’s initiatives may bear fruit for the country amid an impending recession.
