The UK financial sector is on the verge of a serious challenge. The Office for Budget Responsibility (OBR) issued a warning, saying that a few grave risks are nowadays posing a threat to the British public finances.
The major threat comes from the government’s need to fund the budget deficit due to swelling pandemic-related spending. According to the estimates of the financial watchdog, the government has to cover a gap of almost £30 billion in the state budget over the next three years. The bulk of these funds will be allocated to the national healthcare sector for the causes like the mass vaccination and availability of COVID tests. Besides, the transport infrastructure and education also require massive cash injections.
The second risk arises from the government’s commitment to eliminate carbon emissions by 2050. Implementation of such pledges could zoom up public debt. Analysts at the OBR reckon that the Kingdom’s public debt might leap by another 21 % of GDP over the next 30 years. A hike of the carbon tax could make up for soaring public spending. Nevertheless, this measure is not enough to cover tax revenues. The gravity of the situation is worsened by the fact that the UK state debt has been already at around 100% of gross domestic product.
So, here is the third risk itself. At present, the Kingdom’s purse has been overburdened by the massive public debt. The economic prospects are overshadowed by a thorny path to economic recovery. Therefore, experts have weighty arguments to predict the sunset of the prosperous British economy. Indeed, apart from the pandemic aftermath, the country has to assert itself outside the European Union. In other words, Brexit paved the way to standoff between the UK and the EU, including fierce trade competition.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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