Last month Britain had a general election. The Conservative party won a majority and my email inbox filled up with soul searching emails from people and institutions on the left side of British politics. While I share their dismay at the triumph of prime minister Boris Johnson and his ugly populism, we should also be careful what we wish for. There are three big icebergs ahead of the British economy, and whoever is steering the boat in 2020 will need to navigate them.
First, there is Brexit. The Conservatives started this ball of chaos rolling, and by winning the election they will have to own the consequences. If it is a success, they can claim the credit. If it is a catastrophic failure, they can’t blame anyone else. Either way, the people who suggested it and campaigned for it will have to take full responsibility.
Secondly, the economy is cyclical. Periods of expansion lead to a peak, and then there is a recession. These come around every 10 to 12 years, which means we’re due one. With or without the added pressure of Brexit, a slowdown is likely to fall during this coming Parliament. If Labour was taking office right now, it would play into the hands of that those mythmakers who say Labour can’t be trusted with the economy. As it is, Boris Johnson is likely to be in charge with the downturn comes. The fallout will be his to deal with.
Third, we live in a period of uncertainty around energy, and oil prices remain volatile and unstable. It’s been a few years since we had a spike in the oil price, and so we’ve stopped talking about it. But Donald Trump could start a war in the Middle East at any moment. Any conflict with Iran will dramatically impact global oil supplies, leading to rising prices and pressure on spending. Whether or not Britain gets dragged into another war, Trump’s actions in the Middle East is a real wildcard in the pack.
Those are three threats to the economy as we head into 2020, and we do so with little slack in the system. Because the last financial crisis was so severe, interest rates have been at emergency levels for most of the decade. The traditional response to recession has been to lower interest rates to prop up borrowing and investment. With interest rates at 0.75%, the Bank of England will only be able to offer very small incentives. The government will be going into the next downturn without one of its most useful tools.
That’s not a prediction, and neither does it offer much comfort to those who are depressed about the direction the country is headed in. Nevertheless, by this time next year the opposition may be quietly thankful that they didn’t win the election. And if those parties take the next few months to reflect and ask honest questions of the electorate, rather than discuss things amongst themselves, they could be in a very good place for the next election.
- Feature image by Annie Spratt