Boris Johnson has left the UK economy in bad shape | Business

Boris Johnson walked Downing Street in July 2019 with a promise. The doubters, doomsters and darksters would get it wrong again: his leadership would make Brexit a success and restart an economy stalled by divisions in Europe.

Three years later, almost to the day, he’s preparing to leave a country reeling from a political implosion of his own making and an economy teetering on the brink of recession.

The cost of living is rising at the fastest annual rate in four decades, while families face the worst decline in real disposable income on record.

This wasn’t in the Boosterish script. To be fair, it wasn’t the worst global health emergency in a century, nor was it a war on European soil.

The UK economy suffered its worst G7 slump in 2020 as the coronavirus pandemic brought economies around the world to a sudden halt. As the country reopened after lockdown, Johnson pointed to the fastest growth rates in the G7.

That setback is partly due to the scale of the decline, however, as the UK – which is more dependent on consumer-facing services – went into lockdown later and longer than some other nations, resulting in its worst recession in 300 years.

Amidst this series of generational shocks, experts say, deep structural faults have been uncovered – all complicated by three problems: the legacy of austerity; Brexit; and Johnson’s lack of a coherent plan to deal with them all.

“All this time is his legacy,” said Prof Jagjit Chadha, the director of the National Institute of Economic and Social Research, who believes that without Johnson’s key role in the Vote Leave campaign six years ago, Brexit might not have happened. At least not in the same way.

“It has dominated our economic output since 2016,” he said, referring to the year Britain voted to leave the EU.

What followed was weak business investment – with estimated spending levels around 20% below pre-Brexit levels – and limited improvements in living standards.

Without sufficient investment and productivity gains – and now with a shortage of labor to fill record job vacancies – it has become more difficult to keep the economy growing without fueling inflation.

Prices are increasing at a rate of 9.1% and heading towards 11% in October. The Bank of England is responding by raising interest rates to the highest levels since the 2008 financial crisis, with further hikes expected next month.

“We had very slow growth,” Chadha said. “To be fair to Johnson, there have been a number of mistakes by successive governments. Brexit was seen as the answer to our economic problems. The way it was handled only made them worse.”

In the minutes and hours after the referendum result was announced, the pound plunged more than 10%, hitting its lowest level since 1985. Since then, sterling has remained under pressure, which has helped push inflation higher and undermine the standard of living.

The government’s independent economic forecaster estimates that the long-term impact of Brexit will mean a 4% contraction in the economy after 15 years.

As a process, not an event, the damage is still being felt. Trade disruptions and tons of border bureaucracy led to a 40% drop in exports to the EU in January 2021, the first month after Brexit. Although monthly EU exports have recovered, the UK’s trade performance lags behind a post-lockdown surge in other major economies.

Far from what politicians have promised, Brexit is not “done” yet. Company chiefs warn that UK investment has been hit by uncertainty over the Northern Ireland Protocol.

Johnson has tested his patience in corporate boardrooms, enhancing Conservatives’ normally cordial relations with the city with a “fuck business” view of Brexit concerns.

Many of its supporters and opponents agree that Brexit is not working as planned.

Prominent Brexit supporter Gerard Lyons, who was Johnson’s key economic adviser during his time as London Mayor, said projections of the long-term damage were wrong but the process could have been handled better.

“The plus was clearly getting Brexit done. But the Withdrawal Agreement itself was not as good as it should be. It’s not just leaving, it’s what you do when you leave. And it’s not an event, it’s a process,” he said.

Lyons, now chief economic strategist at Netwealth, said “Treasury orthodoxy” – which imposed strict limits on taxes and spending – held the Prime Minister back. However, Johnson’s lack of a coherent plan also made it more difficult to get Rishi Sunak, his chancellor, to loosen the purse strings.

“The real challenge is that Boris didn’t really have an economic vision to go against Treasury orthodoxy,” Lyons said.

“This is a challenge not specific to Boris Johnson, it has permeated the upper echelons of British policymaking for decades. It is one of the more important issues that need to be addressed.”

Johnson will likely be remembered for having attention-grabbing political plans without sufficient substance as the Conservative Party struggled to get the state right size and shape.

Unlike other Tory leaders over the past decade, he believed more in government intervention and the power of public spending, and promised to correct regional imbalances in Britain.

But the promised rebalancing was set aside as the nation weathered first the pandemic and then inflation fueled by the global economic restart and then the war in Ukraine.

Three years after his inaugural speech on the steps of Downing Street, the problems of the economy have gotten bigger rather than smaller.