According to Chancellor Jeremy Hunt, Britain’s economy is “back,” and his growth strategy has been praised at the IMF meeting in Washington.
Kwasi Kwarteng, his predecessor, unexpectedly left the previous IMF meeting in October amid significant criticism.
Mr. Hunt remarked that the international financing body praised him for “putting Britian’s economy back on track.”
Yet, the UK economy did not grow in February, according to the latest available data.
According to the IMF, the UK economy would decrease by 0.3% in 2023, placing it among the world’s worst-performing major economies.
Mr. Hunt said, “It’s other finance ministers who tell me Britain’s economy is back,” when asked if the UK’s current performance undermined his upbeat message.
After months of strike action, rapidly rising prices, and labor shortages, Britain’s economy has only just recovered to pre-pandemic levels.
The RCN union of nurses rejected Friday’s 5% salary rise offer and said they would strike again in early May. Meanwhile, NHS junior doctors in England went on strike for four days over pay, which ended on Saturday at 07:00.
The ongoing wave of strike action in the UK has contributed to the country’s lack of development this week, according to the ONS.
Mr. Hunt, on the other hand, emphasized the significance of avoiding growing inflation by increasing wages. As a result, he predicted that Britain would avoid recession “so far” this year, with higher growth and lower inflation in the following months.
He also claimed that initiatives in his March Budget to help businesses hire more staff and expand investment, such as an increase in childcare financing, should promote growth.
Last year, during Prime Minister Liz Truss’s brief stint, investor confidence in the UK was shaken when Mr. Kwarteng presented an economic blueprint that promised huge tax cuts without explaining how they would be paid for.
The outlook for the United Kingdom, which is strongly reliant on financial services, may be clouded by present banking sector volatility caused by the bankruptcy of three US banks and UBS’s emergency takeover of Credit Suisse.
Mr. Hunt, on the other hand, argued that the UK now has a “very robust, resilient banking industry,” which is in far better shape than before the 2008 financial crisis.
While the government is considering changing some of the laws governing financial services that were implemented after the 2008 financial crisis, Mr. Hunt noted that the goal is to “absolutely not forget the lessons of the financial crisis.”
But, he warned that policies would need to adjust as the UK’s IT and life sciences industries increased.
“We have a lot of high-growth businesses in the UK, and they demand banking services that are suited to their specific needs. So that is a substantial improvement over a decade ago, He stated.
Britain’s economy could get worse if government raises wages over inflation
Even though strikes are dragging on the economy, the chancellor has stated that raising wages to keep up with inflation would be a “terrible error.”
According to Jeremy Hunt, the impact of the junior doctors’ strike on NHS patients is “regrettable.”
Yet, he warned that salary increases that fuel inflation would be “more harmful” to Britain’s economy.
Junior doctors are demanding a 35% pay boost to compensate for 15 years of wage increases that have been less than inflation.
The most recent public sector strike has yet to provide a breakthrough. However, the government has indicated that the wage proposals of junior physicians are “unreasonable” and that negotiations may only take place if the BMA union moves “significantly” away from its current position.
On the sidelines of the IMF’s spring meetings in Washington DC, Mr. Hunt noted that agreeing to pay damages without aggravating inflation was a “very difficult balancing act that we must get right.”
In the United Kingdom, inflation is approaching a 40-year high. Prices in February, for example, were 10.4% higher than in the same month the previous year.
This has prompted workers in a variety of businesses to demand higher pay, culminating in a wave of strikes. As a result, official data show that industrial action hindered economic growth in February.
Mr. Hunt, on the other hand, told the BBC that the administration aimed to “put this period of high inflation behind us.”
If the government kept its commitments, he expected inflation to fall below 3% by the end of the year.
He stated that the worst thing we could do for junior physicians, nurses, train drivers, and teachers is to continue operating the economy so that they are concerned about a 10% increase in the cost of living in a year.
Despite the government’s goal of lowering inflation, many analysts expect it will fall naturally over the next few months as energy prices fall. When asked about junior doctors’ compensation expectations, the chancellor stated that when nurses publicly agreed to a much lesser number after first requesting a 19% raise, “it became the basis of a constructive debate.”
Mr. Hunt replied after the IMF predicted that the UK would be one of the world’s worst-performing major economies this year, arguing that the IMF had “undershot Britain’s economy for quite a long time.”
He added that the IMF now believes Britain’s economy is “on track,” and he praised his previous Budget.
Read Also: IMF: The UK economy will perform poorly
Some G7 finance ministers at the Washington meeting praised the UK for what they saw as a major improvement in tone and involvement since the previous set of IMF meetings, which occurred during the mini-Budget crisis under previous chancellor Kwasi Kwarteng.