Preparing for ‘Brexit,’ Britons feel the pinch at home
Right about now, Eddie Stamton, a construction worker, would normally be making preparations to jet off to a sandy stretch of the Mediterranean for a summer holiday. Not this year.
In the year since Britain’s shocking vote to abandon the European Union, the British pound has surrendered 13 percent of its value against the euro, raising the cost of cherished European vacations. Food from other lands — meat, cheese, wine — is more expensive, too. So is gasoline.
Accelerating inflation may help explain the stunning electoral rebuke of Prime Minister Theresa May and her governing Conservative Party as well as the unexpected strengthening of the Labour Party in Thursday’s parliamentary elections.
Stamton, 51, who lives in northeast London, has traditionally voted for the Conservatives, yet this time he gave his support to the UK Independence Party, the fringe party that has long advocated that Britain ditch Europe. Never mind that the consequences of that position, the falling pound, have yielded the indignity at hand — trading the sunsplashed beaches of Greece for the shaded parks of south London. “Travel is more expensive,” Stamton said. “I’m just going to stay home.”
Here is the economic backdrop for the tumultuous period of political uncertainty now unfolding. May and her party have lost their governing majority just as Britain is set to negotiate terms in its tricky divorce with Europe — “Brexit,” as it is widely known. As the Conservatives try to hang on to control of the government, a weakening economy is likely to intensify the sense of grievance among ordinary Britons who have not gained the spoils from recent years of growth.
The economy expanded by only 0.2 percent over the first three months of the year compared to the previous quarter, far less than the 0.7 per cent pace of growth seen at the end of 2016.
Consumer spending makes up nearly two-thirds of British economic activity, meaning the troubles of ordinary people can have decisive influence over the economy — and politics, for that matter. For the average worker, rising prices for everyday consumer goods are landing atop a decade of stagnating wages.
Few economists expect that Britain will fall into a recession, but the consensus envisions disappointing economic growth ranging between 1.5 per cent and 1.75 per cent annually over this year and next.