Will the EU economy ever fully recover?

The European economy, in particular the UK, has performed poorly since the onset of COVID. Will it ever recover?

https://www.wsj.com/articles/europeans-poorer-inf…

Curious to hear everyone's thoughts. Thought it was funny how the Bank of England's Chief Economist's course of action is to convince everyone that they need to just accept they are poorer:

"Huw Pill, the Bank of England’s chief economist, warned U.K. citizens in April that they need to accept that they are poorer and stop pushing for higher wages. “Yes, we’re all worse off,” he said, saying that seeking to offset rising prices with higher wages would only fuel more inflation."

For all of the U.S's problems, I feel like we don't give it enough credit for the effective economic force it is.

 

EU - yes, and it’s already showing recovery signs. At the end of the day EUs economy, whilst it has its issues - immigration challenges, being multicultural with differing opinions on a lot of things - is extremely diverse.

The U.K. - I’m not so sure. There are a lot of issues that the general populous doesn’t care about. And the ironic thing is that they’re the ones who are being affected by these issues the most. There’s Brexit, mismanagement of the economy, political crisis, housing crisis, inflation, etc etc. it’s funny because it seems that the political leadership can do whatever they want, have 50 scandals and 3 PMs in 5 years and people just don’t care enough to do anything about it. Tories are still strong in the elections, and I won’t be surprised if Rishi takes it in the next one, because labour is too spineless. Add on top of that the fact that Scotland, who’s been pretty much forced out of the EU, wants to leave the British Union more and more each year.

Life in the U.K. has slowly been getting worse and worse, and I don’t see why (although I’m happy for someone to prove the opposite) things would improve. I know this is anecdotal, but so many EU nationals I know have left/are now leaving due to the country just becoming more of a mess.

Of course there are still good things (eg the strong financial sector in London), but people outside of those bubbles are living closer to poverty every year.

 

This has either been written by a Frenchmen, or a Brit with the wool pulled over his eyes. 

The Tories are not particularly strong in elections - they've only really been strong for Johnson and Thatcher. The Tories have been polling at 30% for just about an entire year now - about where Major polled (and ultimately about where the results came in) before his blowout in 97. Pay any attention to the news, and Labour is already being treated as a government in waiting. The SNP has imploded, and it is a very real possibility that Scotland returns to a Labour heartland. Scots are no more inclined today towards independence than they were in 2014, before Brexit.

You claim so many EU nationals are leaving because the country's a mess - but more and more immigrants from further afield are replacing them. Immigration is accelerating, not decelerating. With regard to poverty and quality of life, the IMF's most recent economic outlook (a highly conservative forecast which predicted a recession this year) predicts UK GDP per capita to grow at a faster rate than the EU over the next 4 years - from 58% of US income levels in 2023, to 66% in 2027 (over the same period, the EU is predicted to increase from 50% of the US in 2023, to 51% in 2027).

 

Re Scotland - fair enough! Isn't right to base my view on the opinion of a couple of anti U.K. Scottish friends that I have. Looked up the statistics and was surprised.

I disagree strongly with your point about immigration. A deeper look into it will reveal that the vast majority of the increased immigration number of 600K people is a result of Covid and the war in Ukraine.

I believe the Covid reasons are very self explanatory, and don't require to much explaining (people delaying trips, job opportunities, studies (the number of study visas has increased by 160K since last year. It's not because the U.K. schools and unis have suddenly become of a much higher calibre than the year before)).

Ukrainian refugees - unfortunately, the Ukrainian refugees have been granted a (at most) 3 year long visa which does not allow them to stay after this period, and is just a temporary visa. 260k have been given out, which is nearly half of the above number. It's probably fair to assume that a % will be able to find sponsorship and stay in the U.K., but it is doubtful that it will be a high number. Therefore, in your comparison, it's not really fair to compare the majority of this number to the very high number of the EU workers that have left the U.K.

So, at the very least 420k/600k are due to delayed studies and the war in Ukraine. (Numbers from gov.uk)

For some reason I'm really struggling to find exact figures of EU net migration to the U.K., other than multiple charts from fairly reputable sources saying that it's in the negatives (https://www.bbc.co.uk/news/uk-63743259.amp). So not sure how the above are replacing the list EU talent.

Re GDP per capita. When we take into account the Purchasing Power Parity (from IMF, a very conservative source), we see that the EU estimate outperform the U.K.: https://www.imf.org/external/datamapper/PPPPC@WEO/EU/GBR

At least in the EU people don't have to take out 7 mortgages to afford a 1 bedroom apartment in the capital city of their country.

 
camembert

The Tories are not particularly strong in elections - they've only really been strong for Johnson and Thatcher.

haven't they been in power since 2010 even though their PMs are falling like flies due to scandals? Although, I guess that's more because labour is so dysfunctional and incompetent rather than an inherent tory strength 

 

I think he's right in saying that the Tories are strong in elections, margin of result aside. The Tories are the most successful political party in history, they unify and fight election campaigns much better than Labour have with the anomaly of Tony Blair and New Labour (who probably had the most ruthless Communications/Spin Doctor to tame the media in Alastair Campbell). 2015 GE was an unexpected majority for David Cameron, you can argue they definitely benefit from having more right of centre newspapers supporting them (some of them Murdoch backed) like the Telegraph, Sun, Daily Mail, Times and Daily Express. Obviously the next election will be an expected defeat of in my view conceding a 50-100 seat deficit to a Labour and Lib Dem coalition. The tories will be more disunited than ever.

 
Most Helpful

Outside of London the UK is a depressing place to be and it's only getting worse. At this point you really can't put it on the same level as other top economies. Median UK salary is £27k, median graduate salary is £24k. Outside of IB/Big Law/FAANG/MBB you won't be able to find anything out of undergrad which pays >£40k.

Now obviously the US is leagues ahead of this but even places like Australia and Canada are much better than this. Australia median salary is £42k for example.

On top of this there's no hope of anything improving, everyone is striking, projected recession, house prices still way too expensive and rising, inflation still very high + depressing weather. Really isn't a good place to live. Not to mention this country seems to be engulfed with a crab in the bucket mentality, the conservatives are terrible but they still get elected.

Man I can't wait to get out of this place.

 

Now obviously the US is leagues ahead of this but even places like Australia and Canada are much better than this.

Not really making an economic argument here but I reckon Australia is, on balance, one of the best places in the world to be for basically anyone. It's like a hybrid of all the best elements of the US (high salaries, suburban big houses, car friendly) and Europe (cheap healthcare, moderate student debt levels etc). Add in pretty competent and digitalised administration, good weather, a vibrant jobs market...

I wouldn't say I miss it since it's all too familiar to me, but having lived on two other continents I feel pretty lucky to be from there. 

 

On the point of Scotland, Humza Yousaf is no where near as popular at Nicola Sturgeon and Labour will make inroads at the next election in Scotland.

 

The European economy, in particular the UK, has performed poorly since the onset of COVID. Will it ever recover?

Bruh the UK still hasn't even bounced back from WWII let alone COVID

Remember, always be kind-hearted.
 

In the cases of France and Egypt, I'd argue both of those points are also true lol just look at what they are now compared to what they were

"The obedient always think of themselves as virtuous rather than cowardly" - Robert A. Wilson | "If you don't have any enemies in life you have never stood up for anything" - Winston Churchill | "It's a testament to the sheer belligerence of the profession that people would rather argue about the 'risk-adjusted returns' of using inferior tooth cleaning methods." - kellycriterion
 
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camembert

By that logic, France has never recovered from the Napoleonic Wars, the Netherlands has never recovered from the Fourth Anglo-Dutch War, and Egypt has never recovered from the Roman Civil War.

Yes Chad | Know Your Meme

Remember, always be kind-hearted.
 

EU broadly will recover, UK will also recover but at a slower pace I'd think. Issue is structural though, LT GDP growth is 1% in EU vs. 3-4% US and mid-high single digit for various APAC countries. Europe will continue to become more irrelevant over time and populism will only increase as a result

 

It’s a joke, I was born in England and have lived in the US most of my life. A family member that is 30 still lives with their parents because of the low salaries, she works in psychology. When did this become the norm? 50 years ago you’d be able purchase a ok flat in London as a cashier.

I really like what the French are doing, I’m very much pro rioting at this point, that’s the only way I think anything is going to change. The wealthy continue to squeeze every last drop out of the middle class

 
EH_10

It's a joke, I was born in England and have lived in the US most of my life. A family member that is 30 still lives with their parents because of the low salaries, she works in psychology. When did this become the norm? 50 years ago you'd be able purchase a ok flat in London as a cashier.

I really like what the French are doing, I'm very much pro rioting at this point, that's the only way I think anything is going to change. The wealthy continue to squeeze every last drop out of the middle class

No one is going to get a higher wage because of riots in the streets. 

 
Controversial

Hard to recover when you have a royal family and are dumb enough to turn in your guns. UK is a communist country that is ran by Stalinists from India. So it will be told they’re recovering when reality is they just added another layer to the facade. At least it’s not Canada. Only a matter of time before the Brit’s only accept government provided suicide as a treatment for depression for their glorious ‘healthcare.’ They also have an orthodontist shortage and a stupid clock. I hear the countryside is nice though.

Only two sources I trust, Glenn Beck and singing woodland creatures.
 

My role allows me to spend a significant portion of my life in the UK, the other portion in the US; with business trips all over Europe.

- I think the cost of living crisis is slowly improving, but at such a pace that it may hurt many families for a longer time.
- Petrol (gas) prices are surprisingly lower than expected.
- House prices in the South East are at such high levels that a single professional even with a good income would struggle to afford it. Sure, that person could live elsewhere, but salaries are much lower once you leave Greater London.
- If you need any services like health, pension, insurance, .. - they would have to be private. The services offered by the public as-is are with long wait lists.
- Employment is difficult, especially if you fall into the groups of too young/too old/... - there aren't many jobs around, not just during the ongoing crisis, but also in general. London is a fantastic place if you have the right network, degrees, profile and attitude. But job security isn't as strong any longer. The dream could be over very quickly. There
is a substantial amount of young professionals who are qualified but just can't catch a break and land something in their desired fields. Especially if it is banking.

One aspect to add is that the UK is a nation which adapts, changes, updates itself frequently. This can be the demographic, job opportunities, immigration, CoL, or many other aspects of life. I have seen most of Europe and life on the mainland is often less volatile.

Now, I have seen a UK which wasn't like this. Life there can be really nice with the right job, house/town, partner and lifestyle. But these are much harder to come by nowadays.
 

 

The British people were offered the opportunity last September under Liz Truss to have a Reagan/Thatcher economic revolution, but the people--in their ignorance--didn't understand that tax cuts are NOT inflationary. Deficit spending is inflationary. Properly ordered tax cuts stimulate capital investment, which brings down costs in time. The media and the public sneered at Liz Truss as if they had learned their economics in 1935 Oklahoma.

The Labour Party was taken over by left-wing extremists, which pushed the moderate Labour members and voters into the arms of the Tories, causing the Tories to win for a generation. But the liberals who joined with the Tories effectively gutted conservative ideology, turning the party into a leftist party with leftist policies, so I'm not surprised at all that the UK is a basket case. The ostensible conservative party is to the political left of the American Democratic Party.  

 

googleit

damn you really didn't understand anything of what happened in the uk huh

Since you seem to know so well, why don't you go ahead and correct me? And when you correct me, go ahead and be very specific about where I'm wrong. I'm looking forward to this response. Or, do you just not like that the facts are inconvenient and you actually have nothing?

 

Tax cuts for growth can be debated endlessly. Whilst Truss was ambitious and the only PM who spoke about growth, she was a disaster. One main reason is that these tax cuts were unfunded, disregarded OBR forecasts and independent regulation. They would've definitely been inflationary at a time where inflation was peaking with soaring energy prices and the cost of living. But in my view, the biggest mistakes she made were her awful communication skills, no plan to fund tax cuts and being a stubborn ideologist - remember she was once a remainer and seen on the left/moderate side of the Conservative Party. She wanted to be another Thatcher yet lacked the humility or pragmatism to last a month in office. Thatcher and Reagan also raised taxes at various times in their terms, they read the room (the macroeconomic climate) and judged critically if their tax cuts and fiscal policies could work. Their outcomes in the 80s are debatable, but at least they didn't spook the markets like she did. I do wonder had Sunak announced funded tax cuts, that there would be no such spooky market reaction.

 

It’s a weird time to be in the UK. My partner and I both work in PE, so the cost of living crisis hasn’t really affected us and we broadly just buy what we want. That being said, even in this very fortunate situation, I don’t feel like our quality of life is anywhere near what it ought to be. Housing is prohibitively expensive for very poor / old construction. Where would we go, though? US or Canada is an option for us, but there are some big downsides in my view - constant work culture, little PTO, few nearby international travel options, generally American-centric philosophy, etc. Where is actually good these days? Feels like everywhere has its own issues.

 

Singapore. 

Everything is new, everything is clean. Almost zero crime, which seems to be a rising issue everywhere else.

Housing is very expensive but definitely not as much as it should be for a tiny island of 6m plus you'll make up for it on the taxes anyway. You also won't need a car because the public transport is peerless. 

An added bonus: the administration is ridiculously good. If something needs to be done, the government moves quickly and logically. If you need to interact with the government at all, it's always extremely straightforward (I received my tax bill via SMS). When I moved from there to (continental) Europe, something I never factored in was how frustrating the bureaucracy would be. Doing anything requires so much pointless documentation, rules are often inconsistent to the point where different officials will tell you different things (nobody has been able to give me a straight answer on when I'm eligible for permanent residency for example). I've had weeks ruined essentially because some bureaucrat said no to something mundane, or better yet didn't even respond. I don't think the UK is quite as bad as here in that regard, but I think it'll surprise you how much having a decent government actually improves your life. 

 

Speaking solely from the perspective of London finance, London was the place to be between about 1996 and 2010 and has declined relatively to the US since then. Why? The first boom in London finance was EU integration with the euro, the second was the EM boom. Since 2010, we’ve had a tech / biotech macro that has de-emphasised EM and London in general. Europe is a declining market for banking so I view the recovery of London as being a) EM driven, which is inevitable; b) the growth macro switching to clean energy transitiona, which is all Don favourable 

 

If you can't land a role in Finance or Commercial Law then you are better off leaving the UK. The country doesn't have much to offer outside of these fields. Even FAANG/MBB are unattractive - hard to move up as senior UK-based roles are limited, and hard to find a good exit as UK corporate salaries outside of these firms are miserable.

 

Agree. MBB and FAANG comp is 50% of what they make in the US and exits are even worse. Even if you land them (very difficult) it's definitely worth trying to transfer to US office.

 

Immigration of a certain group of people is the biggest danger to Europe at the moment. So many people fail to understand that Europe, or frankly anywhere else in the world, is not meant to be a cultural melting pot like the US, Canada, Australia etc. Especially not when some of them go around asking for laws to make Europe like the shithole they came from. And I believe economic development will start to be more concentrated in some Western European countries (Portugal, Ireland, Nordics, post-soviet EU). The kids living with their parents at age 30 is real lmao it's so difficult to find a job that pays enough in the early years. I'm personally not strictly for the nuclear family structure/leaving our parents but that's for cultural reasons, not economic. I do not think this will cause a lot of kids to move to the US though since from my experience, Europeans feel rather strongly about (against) American society and stuff like guns, little PTO and maternity leaves, healthcare etc and they're happy to keep doing great in those areas in exchange for performing worse in the economic side. I think what we will see is internal movement of highly talented and educated people to move to countries like Latvia, Lithuania, Czech Republic and the sort.

 

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