In 2022, the United Kingdom has one of the worst economies and highest inflation rates in the “Organization for Economic Cooperation and Development (OECD)”. Oil price increases and covid lockdowns are examples of global short-term challenges that are contributing to the cost-push inflations that are causing these difficulties. The long-term decisions are also the challenges besides short-term decisions which mention the decline in competitiveness, poor growth in productivity, and costs of Brexit with the major part of trading. Thus, the main problem of the UK economy may be low productivity growth

Figure 1: UK labour productivity

It can be seen that since 2009, the main problem of economy in the UK has stagnated labour productivity which falls considerably leaving behind the previous growth of the UK’s economy. The main reason for limited growth in the real GDP is poor productivity and it also depends on the flatlining of average real wages. However, one must bear in mind that the United Kingdom is not only the country with a slowdown in productivity development but also has a record of being one of the slowest nations in the G20.

Figure 2: UK business investment

 The lack of investment in the short-term approach from both the government and business and also in the new technologies are the main reasons for low productivity growth.

 However, it is important to mention that the unwillingness to invest in new technologies is exacerbated by the disruptions of covid but it develops before the covid pandemic and also after the Brexit vote. Another problem in the UK economy in 2022 is low economic growth. 

Figure 3: Real GDP of the UK 

The OECD calculates that the UK economy will be the lowest in G20 in the coming year. As a result, real wage growth will slow, which will be a blow to the government just as the public’s needs are rising and the country prepares to cut taxes. Brexit also maintains this low economic growth and depends on the consequences of the long-term issues.

The UK has left the customs union and the single market and not only left the EU. Thus, this caused a miserable disruption in the EU trade and the consequences have become dangerous. In 2016, this disruption caused the UK to trade by 50%. Exporting goods to Europe the firms are facing challenges in the increase of regulation, charges, and custom forms for the selling of goods in the EU. 

The claim of OBR is that this effect of Brexit will cut 4% of the UK GDP which means a loss of 100 billion pounds in the output and a 40 billion pounds loss in the revenue of the OBR Treasury. The NI Protocol is the increase of row over the UK’s relationship has become one of the greatest problems in the EU. 

However, the EU in retaliation has not ratified the membership with Britain’s Association of Horizon Science funding. The hope of Brexit was to liberalise trade with other non-EU countries. Even though certain measures of trade are quite similar to the UK with the EU, it is very difficult to change the geographical place of the trade to another country from another side of the planet. 

Another impact that is significant in the country is to allow the maintenance of the labours. Brexit had already caused a major problem of labour shortage in the country while covid-19 pandemic is an add-on over the same. Certain areas such as transport, hospitality, fruit pickers, and lorry drivers have been disrupted to a large extent due to the shortage of labourers in the country.

Brexit is the reason for this labour shortage in the country as it is specified that the country does not allow 8000 labourers of the EU according to the Chief Executives of EasyJet. The high tax burden of the GDP ratio is another problem in the UK economy of 2022.

                  b                                      Figure 4: GDP receipts of the UK public sector


It can be seen that the sharp rise of the tax burden in the GDP rate has been demonstrated in the UK since 1993. The problem arises because of no dividend in the public sector investment. The weaknesses of the tax revenues are highlighted by the rise of the tax burden. Thus, the need for government spending is due to the covid bailouts and it also depends on the increase of spending on the wealthy and health care. Therefore, it is evident that the problem here is that the continuation of the pressures on government spending will rise as the country will face the rise in the cost of living, the ongoing covid crisis, and the aging population that will put more pressure on the spending of social security.