The U.K. really worries me

I don't normally comment on the UK, but I have to say I am now deeply worried.

The UK has a deep, deep economic malaise, and it is not because tax rates are too high, or because of the cap on bankers bonuses.

Our problems run deep, and partially Brexit was one of the results of them, but is just now accentuating the problems which were ingrained already.

For years we have failed to invest in skills, infrastructure - transport, housing. This means our labour force is not very productive, and inflexible spacially at least. We have the north - south divide, which means poor kids in the north don't have the skills or opportunities to fill job opportunities in the South East. Business ended up taking immigrants off the shelf to fill the gap - no problem here with skilled immigrants taking the jobs - while government failed to recognise the problem. The result was a rise in racism, populism and anti immigrant sentiment, and that resulted in Brexit. But Brexit has now just accentuated the problems as the skilled migrants got the message that they were not welcome and have left, resulting in shortages of skilled workers in the SE, wage price inflation, and more pressure on the BOE to hike rates. Brexit has made the UK less competitive but is a symptom of years of failed policy - no structural policy at all in the UK to address skill shortages and the lack of UK labour mobility. Johnson talked about levelling up, and partially won the 2019 election on the promise of change, with Red wall constituencies falling to the Tories. But Johnson has no clue about disadvantage as his whole career has been about exploiting his own advantage, and the privilege he was born into - Eaton, Oxford, the Times/Spectator. In reality he did nothing to address the core structural problems in the UK.

So now international business does not want to locate to the UK, because Brexit has accentuated shortages of skilled labour, but add on that the collapse in trade, and difficulties of doing business thru the UK because of strains in relations with the EU, reams of paperwork and bureaucracy related to Brexit, and the lack of these promised trade deals. The shear incoherence of government policy and of our political elite is also now surely a big turn off for international business and UK business as well.

And now Truss/Kwarteng are going for growth with unfunded tax cuts. They are pretending that they are picking up the baton of Thatcherism, but I would contend that Mrs T is now turning in her grave. There is absolutely no way that Thatcher would have funded tax cuts by increased borrowing. Tax cuts funded through increased borrowing will just result in higher UK borrowing costs. The BOE is already suffering a crisis of confidence and is having to now (after being behind the curve on inflation for too long) catch up with interest rate hikes. Surely with increased government borrowing higher borrowing costs will crowd out the private sector and evaporate quickly any benefits from tax cuts on the rich. And message to Kwasi, I am in the top tax bracket and cutting taxes at the moment will have zero impact on my work rate, or enterprise. I will hold back from investing as I worry about the lack of credible and joined up thinking in UK policy - fiscal, monetary, structural, energy policy, and trade, et al. Sort Brexit out - which means accepting it has been a disaster, and it was always going to be a disaster, but accept it was a failure and detail mitigating policies to make up for this catastrophe for the UK.

I now fear a systemic crisis in the UK, a collapse in sterling, forcing the BOE into seismic hikes in interest rates, accentuating the rise in government borrowing costs, crowding out the private sector, while households will be hit by massive increases in mortgage interest payments which will cripple the housing market and raise concerns around the banking sector. The latter begs the question as to why UK households are still mostly holding short term mortgage fixes - 2-5 years, whereas almost everywhere else in the Developed market world, people have long term, 25 year fixed rate mortgages. What has the BOE been doing not to address this problem? The net result is that hikes in BOE rates will pass thru quickly to households, imposing a crippling burden on households as they already face a cost of living crisis. All this adds up to a high risk of a deep recession, centred on the housing market, but impacting banks, Sterling and UK sovereign debt.

Please, tell me where I am wrong?