The various cycles of economic woes experienced in the United Kingdom since the global financial crisis of 2008 may be the biggest reason the British got fed up with the Conservative Party and decided to vote them out in favour of the Labour Party which ushered in Keir Starmer as the new British Prime Minister.
The Conservative Party had been in power for fourteen years and in fairness to them, they took over the reins of power in 2010 during the aftermath of the 2008 global financial crisis. However, the economic recovery was painfully slow and by the time they seemed to be getting the economy back on track, the Brexit referendum in which a slight majority of the British people elected to leave the European Union happened which led to major disruptions in the British economy.
Though the referendum’s outcome was deemed to be the “will of the people” the Conservative Party was blamed for the poor handling of the outcome, which led to a downturn in the British economy. As if the Brexit challenges they had to grapple with were not enough, in early 2020, the COVID-19 pandemic began spreading across the world which resulted in a lockdown that also brought economic activities to a standstill across the globe with Britain having its fair share of economic crisis that emanated from the lockdown.
As was the case with the aftermath of the 2008 global financial crisis, recovery from the COVID-19 induced economic crisis was slow in Britain and it eventually resulted in a recession by the third quarter of 2023 which they were only able to pull out of in the first quarter of 2024.
As a result of these cycles of economic crisis which the British people had been subjected to since the 2008 global financial crisis, economic growth had stagnated and income levels remained the same while inflation had skyrocketed and eroded the purchasing power of the people. This among a number of other reasons disenfranchised the British people from the Conservative Party leadership and eventually led to a return of the Labour Party to power after a fourteen-year hiatus.
Having inherited an economy that was virtually stagnant for over a decade with public debt level now at 99.5% of GDP which has been the highest since the early sixties, unprecedented high levels of inflation, the increasing cost of living, and low productivity within the economy, the Keir Starmer led Labour party has their work cut out for them as a lot would have to be done to revamp the economy and return it to the path of sustainable growth.
It was on this basis that focusing on reviving the economy formed the nucleus of the legislative agenda given to Prime Minister Keir Starmer by King Charles during the opening of parliament to kick off the new administration at number 10 Downing Street.
Prior to that, with the consent of the King, Keir Starmer had named his cabinet members where he appointed Rachael Reeves as the new Chancellor of Exchequer making her the first woman to hold the office in its over 800 years history.
While Rachael Reeves is known for emphasizing the need for more state control in managing the economy, she is a known advocate for economic policies focusing more on infrastructure, education, and labour supply. However, she hit the ground running immediately after her appointment by announcing the establishment of a 7.3 billion pound National Wealth Fund which is designed to attract private investments to boost economic growth by supporting Small and Medium Scale (SMEs), creating jobs, and driving regional growth in the process.
While it’s too early in the day to start assessing the performance of the economy under the new government, Rachael Reeves has made it clear that a lot of tough decisions would have to be taken to fix the foundations of the economy before they can start rebuilding it and they would be soliciting inputs from private sector investors to ensure their buy-in making their policy decisions.
It’s still early days but the Labour Party appears to be off to a good start with a good grasp of the challenges before them. However, it remains to be seen if they will have the political will to implement the necessary policies that will be needed to stabilize the economy before they can return it to the path of sustainable growth. For Keir Starmer and his team, their jobs are well cut out for them.
Oshobi, a development economist, management consultant, and author writes from Lagos, Nigeria.