More Than a Whiff of 1970s Gloom in Brexit-Hobbled Britain

(Bloomberg) --

The pound is sinking, the government is in open conflict with Parliament, British Airways is on strike and there’s talk of nationalizing major industries.

Garbage isn’t piling up in streets across the U.K. But in some respects, events resemble the dark days of the 1970s, when the country was forced to borrow from the International Monetary Fund -- recourse usually associated with developing nations.

The pound has been pressured by Prime Minister Boris Johnson’s pledge to take Britain out of the European Union on Halloween, with or without a deal and in the face of a legal challenge from Parliament. The currency has plunged 17% since the vote to leave the EU in mid-2016.

The IMF crisis of 1976 was triggered when spending legislation proposed by Prime Minister James Callaghan’s Labour government was defeated in Parliament. It was followed by the so-called Winter of Discontent of 1978-79, when public-sector unions halted work ranging from hospital admissions to garbage collection to grave-digging.

The unrest helped Margaret Thatcher to win the 1979 election.

Worse Now?

“In many ways it’s much worse now,” said Steven Fielding, a professor of contemporary British political history at the University of Nottingham. “The Winter of Discontent was a temporary thing that was relatively easily resolved.”

He added that “Britain is much more divided now that it was. It is a more extensive and deeper intractable crisis.”

British Airways grounded most of its flights Monday for the next two days as pilots went on strike for the first time since 1979. While coordinated industrial action is a thing of the past, not least because Thatcher partly defanged the unions, the echo is chilling.

Brexit has divided British politics and society -- even families -- like no other recent issue. The fissure reached a symbolic apogee Friday, when Johnson’s brother Jo quit as member of his government and of Parliament.

As Johnson’s government sows dissent, opposition leader Jeremy Corbyn is trying to sell a package of pledges that would make a Labour government one of the most socialist the country has seen. Among the party’s proposals is re-nationalizing some of the industries Thatcher sold to private owners, raising taxes and curbing bank bonuses.

For all that, the economy continues to defy predictions of a recession. Official figures Monday showed that gross domestic product expanded in July at the fastest pace in six months, though it was flat on a quarterly view.

It’s cold comfort. Bloomberg Economics’ Jamie Rush says that while Britain may have skirted a technical recession, the bigger risk is a slump later this year, with a no-deal Brexit coming on top of weak underlying momentum.

--With assistance from Christopher Jasper.

To contact the reporters on this story: Heather Harris in London at hharris5@bloomberg.net;Paul Sillitoe in London at psillitoe@bloomberg.net

To contact the editors responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net, Caroline Alexander

©2019 Bloomberg L.P.