The mood in the United Kingdom (U.K.) during my recent visit was somber. But not just because of the death of Queen Elizabeth.
Inflation there is rising. It could hit between 18% and 22% next year. Meanwhile, real wages are falling.
And energy prices could jump by 80% in October. Natural gas powers the majority of the U.K.’s electricity. But supplies are restricted due to actions taken by Russia in recent months.
Many businesses aren’t sure they’ll survive. One casualty could be the traditional English pub. During a flying visit to Birmingham in the heart of England, I stopped for a drink (and shelter from the unrelenting rain) in a little pub in the Jewellery Quarter called The Jewellers Arms.
And I recorded a short video to explain why we shouldn’t ignore the problems impacting the U.K. – because in today’s globalized economy, one major economy’s challenges can impact all economies.
Click on the image below – to watch my latest video update. It’s just over four minutes long.
Now, there is some background noise (the pub was busy, as many others were there trying to avoid the rain, too). But as always, I’ve included a transcript below.
Let me know what you think at [email protected].
Editor, Inside Wall Street with Nomi Prins
P.S. Unfortunately, nearly everyone is missing the cracks that are already beginning to show in our economy. Millions will be blindsided by what happens next… America’s next major crisis will be far bigger than inflation, food shortages, energy shortages, and conflicts overseas.
As the contagion spreads from Europe to America, and from the energy markets to the financial system – the lights probably won’t go out in America, but the financial system could be at great risk.
That’s why, on Wednesday, September 28 at 8 p.m. ET, I’m going to explain what’s coming and how you can prepare. I’ll show you a strategy to make up to 10 times your money as this becomes headline news.
I urge all my readers to tune in. Just click here to save your spot.
Hi, Nomi here. I’m coming to you from the middle of the Jewellery Quarter in Birmingham, in the heart of England. It’s about a two-and-a-half-hour drive from London. And it’s the third most populated city in the United Kingdom (U.K.).
Now, 40% of the U.K.’s jewelry comes from this area. And also, this Jewellery Quarter contains Europe’s largest concentration of businesses involved in jewelry.
In and around Birmingham is where the Industrial Revolution actually began. And the Jewellery Quarter is where all the major technological advancements in jewelry have happened since then.
Right now, I’m about to have a drink at the historic 1830s-built Victorian pub called The Jewellers Arms. It’s got one of the most beautiful pub interiors in the country.
Birmingham is where the Peaky Blinders, an early-twentieth-century group of working-class mobsters – now a Netflix show – were based in real life. And they would’ve been quite at home here in this little Victorian pub.
First, I want to explain that while talking with so many workers on the ground here, I am struck by how deeply the U.K. is marred in a tangle of political and economic storms.
Everyone is talking about oppressive energy bills and how they’re being impacted by them.
And now, the U.K. Conservative Party’s Liz Truss is officially the new prime minister. She’s taken her party’s reins in the midst of an economy on edge.
The country seems destined for a recession, if it’s not already in one. Inflation is at its highest rate in decades.
And energy prices? Well, they were already bad. But because of the war in Ukraine, they’re only getting worse as the U.K. prepares for a winter of energy crisis.
Financially, the figures are bleak. Real wages are falling as inflation is rising. Plus, the British pound has dropped to its lowest level versus the U.S. dollar since March 2020. And it’s fast approaching its lowest level since 1985.
Forecasts are for U.K. inflation to jump to anywhere from 18% to a crushing 22% next year.
Households and small businesses are now being told to expect energy prices to jump by 80% in October. And that could be a conservative estimate.
According to some reports, the U.K. is forecast to have the lowest economic growth and the highest level of inflation out of all of the G7 economies.
[The Group of 7, or G7, is made up of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.]
Rising energy bills could put six out of every 10 British manufacturers out of business, or close to that. Factories are starting to reduce workers’ hours and also to limit production.
And sadly, the traditional U.K. pub, often a community hub like this one, is now under threat.
The restaurant and hospitality industry, after struggling through Covid restrictions, is facing an energy crisis not seen in generations. Pub owners are already warning their landlords they can’t pay utility bills and rents.
A recent report from The Guardian suggests that thousands of pubs won’t make it through the energy crisis. And that’s because energy, inflation, and financial constraints have no simple solutions. These issues can’t be solved just by stimulus measures or by tax relief.
Why This Matters To You
For you, it’s key to understand that the problems impacting the U.K. are not just a British problem. As an economic powerhouse, one major economy’s challenges can impact all economies.
And natural gas, which powers the majority of the U.K.’s electricity – those prices are set by the global market.
Yes, the new prime minister is nabbing the headlines. She’s made promises to provide solutions to the energy crisis – including pressing for nuclear power – and for helping working families to cope.
But the real story is the financial and economic pressures to come.
For the near future, I believe that the pound will continue to depreciate relative to the dollar.
And the energy crisis, which still depends on geopolitics in this region, will worsen.
The energy situation – natural gas prices remain at the heart of much of this. And they’re critical to the U.K., Europe, and the global economy.
And that’s why we continue to see natural gas exchange-traded funds (ETFs), like the United States Natural Gas Fund (UNG), appreciate and companies make money.
I’ll be back with more boots-on-the-ground research from the U.K. for you soon.
Happy investing, and I will talk to you soon.