Local businesses in the UK are “exiting the economy” instead of “Brexiting the European Union.”
The UK received an extremely awful assessment from the government’s Insolvency Service on Tuesday, despite a robust earnings season this week lifting most of the world to an unusually cheery mood amid lingering economic uncertainty. The title? Since the 2008 financial crisis, domestic enterprises are closing at a quicker rate than ever before.
Two Economic Blocs: A Tale
In Spain, the bulls are running. French too. Germany, too. And the rest of the Eurozone, I suppose. Even Wall Street is being ruled by them, in fact. But in London, they are not to be found. Eurostat released fresh figures on Tuesday showing that the region’s economy expanded by 0.1% in the last quarter of 2022, modestly shocking analysts and economists. Although analysts had predicted a decline, there is still some optimism that the region may avoid a recession altogether. Instead, a warmer-than-expected winter, declining gas prices, and significant government assistance combined to lessen the region’s residents’ financial burden. Each quarter of 2022 saw growth in the EuroZone overall, increasing by 3.5% overall, outpacing growth in both China and the US.
But domestically, things appear to be almost as good. Although Caterpillar, a major player in the construction industry, reported slightly mixed earnings on Tuesday as a result of rising prices and weakening demand in China, equipment sales in North America are still very strong. And according to the reasoning of financial nerds, the economy is healthy when there is a high demand for creating new items. As an illustration, the S&P 500 just finished its best January in four years, while the Nasdaq 100 just finished its best month since July.
However, the UK is still trapped on an economic island that is both metaphorical and rather tangible:
In contrast to the US, the UK’s waning consumer confidence has wreaked havoc on the building sector, as evidenced by the 4,143 UK construction firms that declared bankruptcy last year, the greatest number of any industry.
Overall, 22,109 corporate insolvencies were reported in 2022, a 57% increase from the previous year and the highest rate since 2009. According to current IMF projections, the UK will be the only G-7 country to experience a recession in 2023.
The Irish luck: The success of their neighbours and erstwhile constituents to the east has to be hurting the Brits even more. In the fourth quarter of 2022, Ireland’s GDP growth rate of 3.5% was the highest in the area. The Euro Zone would not have expanded overall without it.