The economist hailed positive aspects of the performance of the UK economy since Brexit heralded two major challenges ahead which will need to be addressed by the Prime Minister and Chancellor. Soaring energy and fuel bills, as well as the war in Ukraine, have contributed to soaring inflation rates, the economist warned while adding that monetary policy over the past year has been “wrong”. managed” by the Bank of England.
Mr Lyons told GB News: “There is no doubt that there are a lot of bright spots in the UK economy.
“At the moment, these positives are overshadowed by two immediate issues and challenges.
“One is the inflation challenge which is very apparent and will be with us for some time and the other challenge is that the economy already seems to be starting to lose momentum.
“And the danger is that the loss of momentum will continue, as the post-pandemic rebound fades and policy tightening begins to materialize, so yes, there are positives and indeed the data from the labor market this morning show that many jobs are still being created.
“But despite that, the two big challenges we face are an inflation problem and the likely slowdown in the economy as the rebound fades and the political situation tightens further.”
He continued: “There are two issues here of monetary policy and fiscal policy, monetary policy in terms of the Bank of England and interest rates and the reversal of their money printing.
“Now the Bank of England has, in many ways, handed the government a hospital pass because the Bank of England has mismanaged monetary policy for the last year or so.
“Now monetary policy has been tightened and interest rates are expected to rise further, but monetary policy and fiscal policy are not like different ends of a seesaw because fiscal policy can ease does not mean that monetary policy must tighten or because monetary policies increase means that fiscal policy must decrease.
“And that leads into the fiscal policy debate, which is the review of public spending and taxation at the Treasury, and I would say a number 11, and that permeates what also seems to the Prime Minister, is that you can’t really go ahead with loosening fiscal policy through tax cuts until you’re convinced that monetary policy is working and inflation starts to peak.”
According to official figures, Britons have seen their wages rise behind soaring inflation at a record pace as the cost of living crisis tightens its grip on British households.
The Office for National Statistics (ONS) revealed that regular wages excluding bonuses fell 4.5% in April when factoring in consumer price index (CPI) inflation – the biggest fall since recordings began in January 2001.
It comes as inflation hit a 40-year high of 9% due to soaring energy and fuel bills amid the impact of war in Ukraine, and as economies pull out of the pandemic.
ONS data showed that in the three months to April regular pay excluding bonuses fell by 3% after the impact of inflation – the biggest fall since November 2011 – despite rising by 4 .2% of average earnings.
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But in a welcome dose of good news on the economy, figures showed the number of UK workers on payroll rose a further 90,000 or 0.3% between April and May to 29.6 million .
The jobless rate rose slightly to 3.8% in the three months to April from 3.7% in the previous three months, although it remained near a 50-year low.
Vacancies also hit a new high of 1.3 million despite a further slowdown in the rate of growth, while the rate of layoffs hit a new low of 2% in the three months to April.
Chancellor Rishi Sunak insisted statistics show the UK labor market “remains robust with layoffs at an all-time low”.