The UK economy is a ticking time bomb set to explode after the general election, according to a leading City commentator who has warned of a fresh crisis for the pound.
Albert Edwards, who heads the global strategy team at investment bank Société Générale and is well known for downbeat views, chides the coalition for a legacy of “grotesquely wide deficits” in both the public sector finances and on the UK’s current account – its overall trading position with the rest of the world.
In a note for the bank, Edwards wrote:
As the UK general election rapidly approaches, we take a look at the UK economic situation. We say what we see, and after five years of the Conservative and Liberal Democrat coalition government, the UK economy looks like a ’ticking time bomb’waiting to explode after the election.”
Edwards says his commentary is apolitical and notes he previously heaped scathing criticism on the UK economic situation under Labour in 2008. The difference with his latest critique, he says, is that this time the UK compares particularly badly with other economies.
“At least back then [January 2008] the UK was not alone in reaping the sour fruits of economic mismanagement – the US and the eurozone periphery were all sailing in similarly unstable, leaky boats. But now the UK economy stands alone, up to its eyeballs in macro manure. Eventually the stench will fill the nostrils of currency markets with the inevitable result – another sterling crisis.”
To the extent the UK economy has recovered, it is not because the public sector deficit cutting has worked as the government claim, but because, for the last three years, the government has quietly abandoned all pretence at fiscal cuts, kicking the can into the next parliament,” he says.
He is not alone in his concern over the UK’s large current account deficit, which reflects the gap between money paid out by the UK and money brought in, and was the widest for more than 60 years in 2014. It emerged last week that the Bank of England is worried the gap could cause financial markets to turn against the British economy in a time of stress.
Full article: ‘Timebomb’ UK economy will explode after election, says Albert Edwards (The Guardian)