The UK is Now One of the Poorest Economies in Western Europe
EUROPE — For the past few months, the United Kingdom (UK) has been in the world’s limelight, particularly in western media, for seemingly all the wrong reasons. The country’s longest-serving monarch passed away, an ongoing political and economic instability caused by the outgoing Prime Minister, and the deteriorating state of its economic landscape, just to name a few. Of course, we cannot forget the arguably highest inflation rate among developed countries, the current technical recession caused by two consecutive quarters of economic decline, and a grim prospect for next year.
On top of this, confidence and sentiment in British Pound (GBP) is at an all-time low as market participants view the currency as unstable and prone to fiscal mishaps. Hence, the GBP/USD pair is currently down by roughly 15 percent Year-to-Date (YTD), even hitting a decline of more than 23 percent YTD during Liz Truss’s controversial tax cut plan just a month ago. Sentimentally, the fall from the world’s top five biggest economies adds insult to the once-proud empire governing some of the most successful economies now, including the country that just dethroned its economic dominance, India.
UK’s Fall From Grace
For the better half of modern history, the UK has been at the top in terms of economic prosperity, innovation, and ideal living conditions. In fact, it ushered the era of industrialization with its introduction following the successful industrial revolution and is considered the mother of modern capitalism we know today.
However, if we look precisely at economic data, the country has suffered an immense fall from its heights relative to its Western European counterparts. For example, its wages and living standards outside London have been lackluster at best.
According to a recent estimate, “real wages,” which is what workers “actually” receive value-wise when adjusted to economic factors such as inflation, reveals that the current wage average in the country is lower to that of 15 years ago, suggesting a worse pay grade during the financial crisis in 2008.
In addition, despite being the catalyst of industrialization, it currently has one of the worst technological automation numbers among all the developed economies. In fact, according to the International Federation of Robotics, the country’s manufacturing industry currently has barely 100 installed robots per 10,000 manufacturing workers as of 2020 — an average robot density even lower than that of Slovakia and Slovenia.
The Illusion of a Splendid Economy
For most people, the UK probably has one of the best economic landscapes in the world. However, this illusion comes mainly from the prosperous view of the country’s capital — London, where most foreigners who visit the country spend most of their time. As the economics writer Noah Smith puts it: “London’s financial prowess has obscured the widespread deficiency in manufacturing and innovation.”
Or, as the economic analyst Matt Klein remarks, “Take out Greater London — the prosperity of which depends to an uncomfortable degree on a willingness to provide services to oligarchs from the Middle East and the former Soviet Union — and the UK is one of the poorest countries in Western Europe.”
