Britain and Rishi Sunak

The new PM faces unenviable challenges ahead, butheisa testament to the progress Britain has made towards becoming a multi-racial society

- SHANKAR ACHARYA

Britain's economy and polity are undergoing the most serious stress in the last 50 years. A new prime minister, Rishi Sunak, has been anointed 15 days ago, the third in just over two months. Notably, he is the first PM of Indian origin and a practising Hindu. He faces unenviably challenging tasks, to put it mildly.

Let's take the economy first. The annual rate of inflation in September rose above 10 per cent and is expected to rise further. According to the latest Monetary Policy Report of the UK's Monetary Policy Committee, published last week, GDP is expected to decline in the second half of 2022 (that is UK has already gone into recession) and, in their central projection, the recession could last for two years till the first half of 2024, making it the longest recession since the 1920s and raising the unemployment rate to above 6 per cent. The silver lining is that the recession could be shallow compared to earlier ones. The accompanying macroeconomic policy challenges include high levels of government borrowing, large balance of payments deficits and heightened income and wealth inequalities.

The factors contributing to the UK's current economic predicament include: Brexit from the European Union, which kicked in on February 1, 2020, following the referendum result of 2016 and subsequent prolonged negotiations; a long period of low productivity growth; the Covid pandemic shock and its handling; the ongoing Russia-Ukraine conflict and its implications for energy and food supplies and prices; and the recent September fiasco of the Liz Truss "Mini-Budget" of September. How much of the economic problem is attributable to each such factor is for UK experts to tell us ...or anybody's guess, depending on the reader's faith in economic scholars.