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How will the UK’s economic problems affect the global economy?

21/10/2022

Since the unveiling of the UK Government’s mini Budget in September 2022, the UK economy has gone into meltdown. The value of the pound plummeted, government bond crashes led to pension schemes needing to be bailed out, and general sentiment about the state of the UK economy is low. 

But is it just the UK economy that will suffer? What impact will the UK’s economic problems have on wider global markets? 

 

Panic spreads

The UK holds a core position amongst global financial markets: it is, after all, one of the leading world economies. For this reason, any panic about the state of the UK economy can quickly spread to other nations – and has done in the past.

When the UK’s plans for tax cuts were announced, the International Monetary Fund openly criticised these plans. For the IMF, such open criticism is rare – and it will have contributed significantly to the decline of the pound in the aftermath. 

BBC Economics Editor Faisal Islam stated that the IMF’s criticism of these plans meant that any crisis happening in the UK “could spill over into a global slowdown”. 

 

Not just the UK to blame…

It remains to be seen what impact the current economic crisis will have on the UK itself going forward, let alone the rest of the world. What’s important to remember, though, is that the picture is already not so rosy in other nations. 

On October 10th, it was announced that the global economy has contracted for the second month in a row. A slump in the real estate sector, manufacturing concerns, falling demand in the service sector, high cost pressures and rising interest rates are all to blame – and while trends do vary from region to region, it shows that the problems experienced by the UK are also being felt across the globe. 

The key difference will be how nations work to resolve these issues, bringing their economies back on track. 

 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

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