Boris Johnson: his resignation will affect the market
Boris Johnson entered Downing Street in July 2019 with a promise. The doubters, doomsters and gloomsters were going to get it wrong again: his leadership would make Brexit a success, re-igniting an economy stalled by the divisions over Europe.
Three years later, almost to the day, he prepares to leave with the country reeling from a political implosion of his own making, and an economy teetering on the brink of recession.
The cost of living is accelerating at the fastest annual rate in four decades, while families face the worst hit to real disposable income on record.
This wasn’t in the boosterish script. To be fair, neither was the biggest global health emergency in a century and war on European soil.
Britain’s economy suffered the sharpest fall in the G7 in 2020 as the coronavirus pandemic brought a sudden stop to economies around the world. When the country reopened after lockdown, Johnson pointed to the fastest growth rates in the G7.
However, that snapback is in part down to the scale of decline of Boris Johnson politics, as the UK – more dependent on consumer-facing services – entered lockdown later and for longer than some other nations, leading to the worst recession for 300 years.
In the midst of this succession of generational shocks, experts say deep structural faultlines have been exposed – all made more difficult to tackle by three problems: the legacy of austerity; Brexit; and Johnson’s lack of a coherent plan to deal with them all.
“This whole period is his legacy,” said Prof Jagjit Chadha, the director of the National Institute of Economic and Social Research, who believes without Johnson’s key role in the Vote Leave campaign six years ago, Brexit may not have happened. At least not in the same way.
“It has dominated our economic performance since 2016,” he said, referring to the year in which Britain voted to leave the EU.
What has followed is weak business investment – with the level of spending estimated to be about 20% below where it would have been without Brexit – as well as limited gains in living standards.
Without sufficient investment and productivity gains – and now with a lack of workers to fill record job vacancies – growing the economy without stoking inflation has become harder.
Prices are rising at a rate of 9.1%, and heading for 11% this October. The Bank of England is responding by hiking interest rates to the highest levels since the 2008 financial crisis, with more rises expected next month.
“We’ve had very slow growth,” said Chadha. “To be fair to Johnson, there has been a sequence of errors from successive governments. Brexit was thought to be the answer to our economic woes. In the way it has been managed, it has only exacerbated them.”
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