The chief economist of the Bank of England said that the energy crisis in Europe and the tight labor market in the United Kingdom, due in part to Brexit, had helped the British economy to underperform its peers.
Huw Bell said on Wednesday that Britain faces twofold difficulties with regard to both “European gas price pressures and the North American problem of people leaving the labor market”.
The UK economy is the only one among the Group of Seven richest countries that has failed to recover to pre-pandemic levels while the Organization for Economic Co-operation and Development has predicted that it will perform worse than all G20 countries except Russia.
Bell told the UK Regions Economic Summit at the Institute of Chartered Accountants in England and Wales that this poor performance was partly due to the UK being more reliant on gas than other European countries, such as France, which relied more on nuclear power.
He added that the UK was facing a “tightening job market and increasing lethargy” with many elderly people leaving the workforce.
“The interaction between the two could be very problematic,” he said, as both elements add to inflationary pressures.
The UK’s exit from the European Union has affected the economy and rising prices, Bell said, adding that it is difficult to quantify its impact.
He said that Brexit had hit the labor market by reducing the flow of EU workers into the UK, when it might have reduced competitive pressure on domestic producers, giving them more pricing power.
Pill expects UK inflation to start slowing next year as natural gas prices stabilize.
“We expect to see headline inflation ease in the second half of next year,” he said.
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