Shock figures released by the Office of National Statistics (ONS) show that Britain is £490 billion poorer than was thought. Britain’s stock of wealth has fallen from a surplus of of £469 billion to a net deficit of £22 billion.
The UK has totally lost its reserve of foreign assets, and is actually in a much more vulnerable deficit, losing any safety margin just Theresa May’s government is attempting a breakthrough in a crucial stage of Brexit negotiations.
This massive write-down of the UK’s assets has left markets stunned across the world, and is majorly embarrassing for the UK government at a precarious time for the country. Foreign direct investment into the UK at the same time has also fallen from a £120 billion surplus in the first half of 2016 to a £25 billion deficit for the first half of this year.
Major questions will be raised about how the stewardship of the economy, how the government has been measuring the UK’s national income so inaccurately, and how Britain’s safety net has been allowed to disappear in such a major way.
The Daily Telegraph report that global banks have been left stunned by the revised ONS figures dropping almost half a trillion off the UK’s assets.
“The outflows from the UK began in mid-August,” Simon Derrick, strategist at The Bank Of New York Mellon, the world’s biggest custodial institution, looking after £23 trillion. He added: “The big buyers are disappearing”.
“It is time to reappraise where the UK is,” reacted Richard Murphy of Tax Research UK. “It’s not pretty, at all. The need for a Brexit deal is overwhelming. But who knows if it is on the cards.
“And then, start asking questions. Perhaps the most compelling is of the sectoral balances, because if the foreign sector is not supplying the support it was then the obvious question is who is substituting for them? This, right now, might be the biggest question of all. The foreign sector has been UK savers. If it isn’t any more and the government position is correctly stated, what is happening in the UK domestic market? That’s not clear.”
The colossal sum that’s gone AWOL is the equivalent of 40 years of EU contributions and could leave the pound plummeting a further 20%. The drop in investment will be linked to the shambolic nature of current Brexit negotiations. And questions will be asked about the amount of debt floating around the UK domesticaly.
Three million Brits are in persistent debt, paying around £2.50 for every £1 borrowed. The Labour Party wants this capped at £1 or 100% of the borrowed amount.
If we are on the brink of another debt crisis, it is now the Labour party attacking the Conservatives on economic mismanagement, rather than the other way round. And with the pound plunging nearly every time Theresa May delivers an important speech and the UK’s debt rating downgraded to its lowest level in history, Labour have plenty of ammunition right now.
After three elections, the Conservative Party can no longer blame the Labour Party for the global banking crisis of 2008, for the state of the UK economy, an ever weaker Brexit negotiating position and a globally discredited, bankrupt policy of austerity.