Experts predict slower UK economic recovery

Political uncertainty, long-term effects of Brexit are thought to be main causes

Political uncertainty and the long-term effects of withdrawing from the European Union will hinder the United Kingdom's recovery from the pandemic, say economists.

Inflation, labor shortages and continuing COVID-19 waves mean the UK will find it harder than other developed nations to build back, said experts polled by the Financial Times.

Disruption to supply chains and the increasing risks of climate change were among other global factors listed as major economic challenges faced by the country.

Economists interviewed by the FT warned that tackling these issues may prove more problematic for the UK than other nations amid political uncertainty, and while the effects of Brexit obstruct and slow down trade channels, and the government eases off fiscal support for businesses.

"A combination of a ragged edge over Brexit and political uncertainty will continue to hamper what might otherwise have been a strong recovery," said Jagjit Chadha, director of the National Institute of Economic and Social Research.

Other survey respondents did not take such a pessimistic tone, and said UK growth was likely to exceed or at least equal that of the eurozone in 2022.

Kallum Pickering, senior economist at Berenberg, told the FT that consumers would benefit from "excess savings" and that businesses still held "solid investment intentions".

Some noted that with new customs controls coming into full effect in the UK this year the impact of Brexit would increase trade frictions, which will raise inflationary pressures.

Respondents said this would mean that the Bank of England would likely need to tighten monetary policy, and therefore delay the UK's recovery.

Many of those surveyed criticized the government, citing "unstable politics" caused by scandals that have raised the possibility of a leadership challenge to Prime Minister Boris Johnson. Panicos Demetriades, a professor at Leicester University and a former governor of the central bank of Cyprus, panned Johnson's "arbitrary, if not chaotic, style of government" and said a potential leadership challenge may "encourage firms to remain in 'wait-and-see mode', and postpone investment decisions until the economic policy outlook becomes clearer".

All of those polled pointed to inflation, which reached its highest level in more than a decade in November. It is expected to continue rising in the first quarter of this year and will likely remain above the central bank's 2 percent target by the end of the year. Wages would not keep up with prices and rising taxes, leaving most people worse off, many economists said.

"Whatever the course of the pandemic in 2022, most of us can expect a severe financial headache," John Philpott, an independent consultant, was quoted by the FT as saying.