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UK Is About to Become Stagflation Nation

The nation put cost-cutting ahead of investment for years. Now the bill is coming due.
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Illustration: Oscar Bolton Green for Bloomberg Businessweek

In a world reeling from soaring inflation and weak growth, the UK holds a special place. It’s on track to be the advanced nations’ stagflation capital. Prices are expected to rise 13.1% over this year and next, the most in the Group of Seven, and the UK will drop to the bottom of the pack for growth in 2023, according to the International Monetary Fund. The National Institute of Economic & Social Research reckons the country will be in recession before next year.

It’s a curious form of exceptionalism but one that’s become all too familiar. Whenever a squall in the global economy lands on the shores of the UK, it has a tendency to turn into a tempest. The collapse in 2020 after Covid-19 struck was the deepest of the G-7. Fourteen years after the 2008 financial crisis, the government still owns 48% of NatWest Group Plc, the rebranded Royal Bank of Scotland. The US, where it all started, moved on long ago.