The United Kingdom’s GDP growth stayed flat in the last fiscal quarter, barely keeping the economy from sliding into a recession amid protracted labor strikes and high inflation rate that stands at 10.5%.
One reason it managed to float on? An increase in consumer spending spurred by the England soccer team’s efforts in the World Cup. Britain’s services sector was the best-performing part of the economy in November, albeit recording a modest output of 0.2%. The increase was mostly spurred by a 2.2% increase in food and beverage services correlating with the beginning of England’s World Cup run.
The UK has seen the weakest economic recovery among the G7 countries, with the Bank of England (BoE) projecting the economy won’t fully return to pre-pandemic levels until 2026. Chancellor of the Exchequer Jeremy Hunt said the country has a long way to go on the path to economic recovery.
“Our country is more resilient than many feared,” Hunt said in a statement. “However, we are not out of the woods yet, particularly when it comes to inflation.”
The UK’s central bank is still expecting a further downturn, with the BoE expecting the economy to slide into a mild recession during the first fiscal quarter of 2023. Additionally, the IMF has said that it expects the UK will be the only G7 country to record an economic contraction this year, with even Russia’s strained economy expected to post modest growth.
Charted: UK’s GDP growth
The lack of growth in the UK economy this part quarter is an improvement compared to the the third fiscal quarter of 2022, which recorded a fall in GDP growth. Most economists define a recession as a sustained decline in economic activity—usually, two consecutive quarters of shrinking GDP growth.
World cup spending trends, by the numbers
15 million: Number of pints that were expected to be sold at British pubs during the England vs. Senegal match in early December.
38%: Share of Britons that reported being more excited for the World Cup than Christmas celebrations in a survey
£269 million ($325 million): Estimated additional retail sales spurred by the football festivities in the United Kingdom.
Labor strikes’ economic impact
More than half a million British workers walked off their jobs last week, the latest in a series of strikes across the United Kingdom. Workers are protesting stagnant wage growth amid high inflation, as well as a controversial proposed law that prohibits some emergency workers and rail employees from participating in strikes.
The labor actions have been primarily organized by nurses, teachers, and rail workers, industries essential to the British economy. More than 1.6 million working days had been lost to labor disputes in the six months leading up to November 2022, with the rate of strikes only increasing in the months since.
Strikes in the National Health Service (NHS) alone caused a 2.8% decrease in health and work activity in December. Additionally, labor actions by rail workers cost the UK economy £1.7 billion ($2.1 billion) over eight months last year, according to research by the UK-based Centre for Economics and Business Research. Rail minister Huw Merriman recently admitted that settling the rail workers’ dispute early on would have been cheaper. Yet, according to labor unions, the government is not engaging in salary negotiations “at any level.”
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The recent conclusion of the 2018 World Cup in Russia has had a surprising and unexpected result in the UK, where it helped to narrowly avert a recession ahead of Brexit.
The tournament injected an estimated £3billion into the British economy, contributing to a quarterly growth rate of 0.1%. This marginal, albeit helpful boost has been seen as a sign that the UK may be able to survive a no-deal Brexit if current trends continue.
The UK’s largest broadcaster, the BBC, was a major financial powerhouse during the tournament, playing the host to eight games from around the world, including the semi-final between France and Belgium. This drove a 1.1% increase in household expenditure, and with the additional surge in retail activity, it helped to give the economy a much-needed boost.
Looking more closely at the economic data, companies such as hotels, restaurants, pubs, and entertainment venues all saw a significant up-tick in activity during the World Cup, with these sectors collectively adding 0.2% to the overall quarterly growth figure.
It is also worth noting that this growth was not limited to the UK alone. Countries like Spain, Brazil, and China also experienced spikes in their respective economies, as viewership of the tournament was at an all-time high.
With the uncertainty of Brexit looming in the near future, the UK has welcomed this modest boost to its economy with open arms. The World Cup could prove to be the difference between a recession or a period of relative prosperity in the UK after Brexit has been fully implemented. Ultimately, only time will tell.