Britain is on the road to becoming an emerging market country, according to Saxo Bank.
Political instability, trade disruptions, an energy crisis and skyrocketing inflation is chipping into the country’s reputation on the world stage.
In a research note Monday, Saxo Bank’s head of macro analysis, Christopher Dembik, said the UK is “more and more looking like an emerging market country.”
Citing trade disruptions due to Brexit and Covid-related bottlenecks, he said the only factor missing from a characterization as an emerging market country is a currency crisis, with the British pound holding firm despite the litany of macroeconomic headwinds.
“It only dropped 0.70 per cent against the euro and 1.50 per cent against the US dollar over the past week. Our bet: after surviving Brexit uncertainty, we don’t see what could push the sterling pound into a free fall.”
However, he suggested that all leading indicators point to more pain ahead for the British economy.
For instance, new car registrations — often perceived as a leading indicator of the health of the British economy — fell from 1.835 million in July 2021 to 1.528 million last month.
“This is the lowest level since the end of the 1970s. The recession will be long and deep. There won’t be an easy escape. This is most worrying, in our view. The Bank of England assesses the slump will last with GDP still 1.75 per cent below today’s levels in mid-2025,” Dembik said.
“What Brexit has not done by itself, Brexit coupled with Covid and high inflation have succeeded in doing. The UK economy is crushed.”