SWINDON, England — Britain’s energy crisis hit Chris Watts quicker and harder than most businesspeople: His company installs and fixes gas boilers. Customers began to delay repairs and replacements as soon as they heard about the skyrocketing fuel costs in August. Many people are still not able to turn the heat on in an effort to reduce their expenses.
“In the 28 years that we’ve been in business, we’ve never experienced the shock to the system that we’re seeing now,” Mr. Watts said that he was forced to move the family-owned company to tighter quarters at an industrial park.
Like tens of million of Britons, he now faces the prospect of a two-year recession. “It’s one thing after another,” Mr. Watts, 55 recalled his struggles with Brexit and the coronavirus pandemic. “At some point, it’s got to stop.”
The UK has been going through crisis after referendum on leaving the European Union in 2016. But this latest round of bad news is different: double-digit inflation and a grinding downturn, increasing interest rates, political upheaval, and a steady rise in inflation. The next body blow will come on Thursday, when the new government is expected to announce that it will raise taxes and slash spending to try to plug a gaping hole in the nation’s finances.
The result has been to make normally peaceful Britons feel anxious, not only in downtrodden industrial areas but also in better-off, more modern cities like Swindon. Swindon, a Victorian-era railway station 72 miles west London, has reinvented its self over the years, first as an automaker hub, then as a distribution center for large retailers like Amazon. It is also a political bellwether. The town has a history of voting in the party of its choice.
The mood in the city is quite somber right now.
“I don’t get it,” said Dennis Azzopardi, 62, who works for Royal Mail and was celebrating his wife’s birthday with her at a local pub. “The oil and gas companies are making billions. Why isn’t any of that coming back to us?”
According to the Azzopardis, their most pressing concern is for their daughters, aged 33 and 36, who have mortgages that, unlike most loans in America, have shorter terms than in Britain. Their daughters will soon be facing a steep rise in their monthly costs as interest rates for loans continue to climb.
Mr. Azzopardi stated that he hoped Rishi Sunak, the Conservative prime minister, would be better equipped to deal with these challenges than Liz Truss (who lasted just 50 days after Liz Truss’ trickle-down tax proposals caused havoc on financial markets). (“He understands money a bit, doesn’t he?” Mr. Azzopardi spoke of Mr. Sunak.) But he said he was skeptical that any government, including one led by the opposition Labour Party, would be able to fix the country’s proliferating woes.
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“Labour isn’t what it used to be,” In words that could equally apply to Swindon or Britain as a whole, Mr. Azzopardi spoke.
Although Britain shares many of the same problems as other European countries, it is also plagued by two unique factors. First, the legacy of years-long austerity that has hollowed out public institutions such the National Health Service and second, Brexit which has hampered trade with Europe and depressed corporate investment. Second, the shortage of foreign workers has squeezed the labour force and depressed corporate investment.
Britain is the only member of the Group 7 that has an economy that is smaller than it was before the outbreak. It was recently overtaken by India as the world’s fifth-largest economy, while Paris surpassed London as Europe’s biggest stock market, by value, according to a Bloomberg calculation published on Monday.
The Bank of England’s desperate battle against inflation — its hike in interest rates two weeks ago was the largest since 1989 — is expected to trigger a recession that economists say could be the longest since the 1930s.
Britain’s troubles were magnified by the misbegotten fiscal experiment of Ms. Truss. Her budget-busting tax cuts which disproportionately favor the rich sent the pound to a free fall. It also drove up the yield on British bonds. These were days before igniting a liquidity crisis in pension funds.
“In our recent history, there isn’t an exact analogy for this situation,” Anna Valero (a senior policy fellow at The Center for Economic Performance, London School of Economics) said that the project was a success. “We’ve had a series of long-term crises followed by these new shocks.”
Former chancellor of Exchequer, Mr. Sunak worked once for Goldman Sachs and quickly calmed markets. British interest rates have returned to normal levels. This means that Britain won’t be mentioned in the same breath with Italy at meetings of finance ministers.
But the prime minister’s tranquilizer came with painful side effects. He and his new chancellor, Jeremy Hunt, have warned that they will need to fill a shortfall of roughly 50 billion pounds ($58.2 billion) in the budget to stabilize Britain’s finances and preserve its credibility in the markets.
It is unclear what mix of tax increases and cuts they will impose, but it is certain that it will bring back fond memories of austerity budgets imposed on the country by George Osborne in 2010 and David Cameron as former prime minister.
“Household disposable income is going to fall by more in the next two years than at any time since records began being kept in the 1950s,” Tony Travers, Professor of Politics at the London School of Economics.
Britain’s wild ride in the markets has left Mr. Sunak with less room to maneuver. He is unlikely, for example, to try to overhaul the country’s cumbersome urban planning laws, one of several contributors to Britain’s sluggish growth rate since the financial crisis of 2009.
Swindon is still suffering from the effects of these calcified rules. After the Great Western Railway Works, once capable of producing three steam-powered locomotives per day, closed, the city rebounded by attracting carmakers and financial services companies. Honda Motor Company came to the city in 1986, just as the railway factory was closing.
However, in July 2021, the Japanese automaker closed its assembly facility, displacing 3,500 workers. While Honda insisted its decision reflected a desire to focus on Asia and the United States, local people blame it on the city’s rejection of a proposal by Honda to build wind turbines next to the plant. Recently, Mr. Sunak rejected a plan from Ms. Truss that would have made it easier to construct onshore wind farm.
“Sunak and Co. have been so spooked,’’ said Jonathan Portes, a professor of economics and public policy at Kings College London. “Even if they wanted to, they feel as if they don’t have the political space.”
For many in Swindon, there is a lingering suspicion that Brexit also played a part in Honda’s departure. Honda provided generous severance packages to employees, which helped the city weather the shutdown. But the loss of the factory’s well-paying jobs contributed to a sense of diminished expectations.
Reg Bates, who worked as a quality control inspector for a company that made children’s car seats for Honda, recalled his shock at bumping into a former colleague, who had found lower-paid work as a porter at a city hospital.
“Any employer in the country, no matter what the nature of the work, would be lucky to get a Honda employee,” “Mr. Bates is now 70 years old and has retired.”
As Honda left, however, Amazon arrived — giving Swindon another foothold, though one lower on the economic ladder. It built a huge warehouse and employed 2,500 people, many of whom were Honda employees. It starts at 11.45 pounds ($13.35 an hour) and union organizers complain of the harsh working conditions in Amazon’s other locations.
For workers, Britain’s labor shortage is a silver lining in the economic cloud. There is so much demand for jobs that workers can easily find work elsewhere, if they’re not happy at Amazon or any other company. The soaring cost of fuel and food has made them more aware of the negative effects of inflation than previous downturns.
“For the first time, workers are seeing the effect of inflation driving past petrol stations on their way to work,” David McMullen, a British trade union official, said that he is working to organize workers at Amazon.
For other people, however, Britain’s multiplying woes are evidence of a political system that is broken. Many protestors rallied in Swindon against the government, demanding that it implement a wealth-tax. The large billboard pictured the five British prime ministers since Brexit. It also featured a slogan. “Nothing changes.”
On a rainy, cold day, elderly people stopped at the Swindon Hub, which is a community center located on the main shopping street. The center’s sponsors said it would stay open through the winter, when they expect the number of people who need shelter from the cold to increase.
“You’ll be getting people that genuinely need help,” said Jol Rose, 56, a member of the Hub’s board. “We’re picking up the pieces of a state infrastructure that is falling apart.”