U.K. Prime Minister Rishi Sunak is looking to cut spending and raise taxes to appease financial markets but that won’t give Britons a renewed path to growth and prosperity. Rishi Sunak: ‘We will not pursue any relationship with Europe that relies on alignment with EU laws’
From 2010 to 2016, David Cameron led the U.K. out of the global financial crisis with taxes at a fairly stable 33% of gross domestic product. Brexit, COVID and the war in Ukraine bedeviled his successors—Theresa May, Boris Johnson and Liz Truss. Those are leaving the U.K. with troubled finances, inflation, and the prospect of a long recession.Uneven prosperity Cameron exploited opportunities for London’s financial sector inside the European Union but as that industry prospered, the rest of the country fared less well.
Former Chancellor Rishi Sunak takes over one of the world’s largest economies at a time of financial turbulence. Photo: Justin Tallis/AFP/Getty Images
Overall GDP growth shifted down to 1.7% during his recovery from 2.6% during the prior expansion. Going forward, growth will likely be about 1.2% but only after a recession to quell inflation. Financiers like Sunak got rich, but the once-heavily-industrialized north of England languished. Ultimately, that made possible Brexit and a populist Boris Johnson. May and Johnson were either poor negotiators or lacked leverage when crafting an exit deal with the EU. The final agreement left the U.K. in unenviable circumstances. May agreed to negotiate Britain’s large severance payment to the EU before discussing a post-Brexit free-trade deal with the EU—that gave away one her most important bargaining chips. Johnson accepted an agreement that creates free trade in goods without “passporting” for London’s financial sector to compete on an equal footing with Frankfort, Paris and Amsterdam. Now, German manufacturers and French farmers and vintners have free trade access to U.K. markets, while London’s finance industry lacks equal access to continental markets. Michael Strain: Conservatives in the U.K. and the U.S. must turn away from the populist politics of grievance and return to pro-growth policiesMissing ingredient Johnson supported Brexit on the idea that Britain would negotiate free-trade agreements with other nations. The U.K. now has pacts with Japan, Canada and Mexico but the most essential element for this strategy would be a deal with the United States. Unfortunately for Britons, President Joe Biden has a …