January and February are the most depressing months of the year. The winter blues hit hard during these months as skies turn grey, the air becomes colder, the sun is rarely seen, and the impact of excessive celebrations of the festive seasons are truly felt. Recent economic news has added to this feeling of gloom.
In January it was announced that 2 Sisters Food Group would close its factory on Anglesey, putting 730 jobs at risk. The loss of so many jobs would have a devastating impact on Llangefni, where the factory is based, which has a population of 5,000. In February it was announced that 240 jobs were in danger at Iceland鈥檚 Deeside warehouse in Flintshire. The cost-of-living crisis will only intensify for those who lose their jobs. Unfortunately, these jobs losses reflect the national economic situation.
In January the IMF forecasted that the UK would be the only leading economy to slide into a recession in 2023. Even Russia鈥檚 economy was likely to grow quicker than the UK鈥檚. While explaining their forecast, the IMF noted that the British public and businesses faced higher energy prices compared to other countries, higher borrowing costs, and higher inflation (albeit past its peak). All these factors were expected to restrict the UK economy鈥檚 ability to grow. Forecast such as these, even from the world鈥檚 most important international economic institution, is just that, a forecast. But comparing the forecast for the UK economy against other countries shows that the British public and businesses are likely to face a difficult year in comparison to others. The Bank of England echoed the IMF鈥檚 forecast early in February when it published its short-term forecast for the UK economy. The central bank believed the UK economy would be stagnant in 2023 and was unlikely to see any improvement until 2024.
In February we heard how the UK economy had been stagnant in the final quarter of 2022, narrowly avoiding slipping into a recession. But it was a recession in all but name. That was the conclusion of many economists who argue that while the official data showed the UK economy stood still in the last three months of 2022, it was still in bad shape. The UK economy is still smaller than what it was before the pandemic. In contrast, the US economy was up 5.1% and the eurozone had grown by 2.4%. The UK is the only G7 economy not to have regained the economic ground lost during the health crisis.
What can be done to turn the economy around? A positive step would be to provide support for our entrepreneurs. By creating new products and services, entrepreneurs simulate new employment, which ultimately results in the acceleration of economic growth. To flourish, entrepreneurs need three things: a predictable policy regime, open collaboration with international partners, and targeted support for fundamental research and early-stage development. All three can be provided by policymakers in Westminster. If we want to see a change in our economic fortune, let鈥檚 make sure our entrepreneurs have the right environment to flourish.