The UK economy is poorer, Gulf countries stand to benefit

Gulf countries will benefit from the devaluation of the British pound and become able to secure better prices for assets and conditions for investment

Huw Pill, the chief economist at the Bank of England, came out yesterday to affirm what many have known for years. The UK is a poorer country than its population realises and accepts. The sad truth is things are going to get worse. The unstartling diagnosis requires a political economy analysis.

The deindustrialisation of the British economy and its financialisaton meant the UK is vulnerable to shocks in the global real economy that may cause shortages in goods and raw materials.

COVID-19 and Ukraine war induced shortages mean you cannot fix the economic problem by printing more money. There are just not enough raw materials and goods to go your way. Hence, increasing wages will not fix economic problems, but will drive inflation higher. With the added pressure of increased protectionism, shortages are expected to prolong for years to come.

A crisis in Taiwan or a global recession will result in further shocks to the British economy, which is heavily reliant on exporting services to the world. It is important to note that many countries in the world are already in a recession. Some have been in a recession for years already and growth has declined or stagnated. The world entering a technical recession will exacerbate existing economic difficulties and the UK, like others, will fall into a similar trap.

Political and social disturbance and turmoil is expected ahead as strikes and protests become more frequent. Extreme politics will rise as society tries to find answers to the prolonged challenge. Re-industrialisation and strategic partnerships can help the British economy overcome the strategic economic decline. The trend of dedollarisation and global economic shifts towards Asia will add pressure on the economy to restructure to meet the new competition and global GDP share losses.

Gulf countries are set to benefit from the UK challenge. As the negotiations for a Free Trade Area between the UK and Gulf Cooperation Council reach advanced stages, gulf countries will benefit from the devaluation of the British pound and become able to secure better prices for assets and conditions for investment. The scope of cooperation will increase as UK-based businesses seek new markets and sources of investment and strategic partnerships.