The Sick Man of Europe
(6 min read)
Turkey (the Ottoman Empire) became known as ‘the sick man of Europe’ in the later 19th century. Its global political influence faded, its financial position weakened, and its political elite remained stuck romanticizing their past. The UK’s relative performance since the 2016 Brexit vote positions it to carry this moniker for the foreseeable future (Chart 1). Since 2016, UK growth has underperformed non-UK DM growth by 7.25 percentage points (thanks to dreadful performance in 2020; the cumulative gap had been 1.5 percentage points before).
Financial market participants face a key judgment call. Does the UK’s recent awful relative performance reflect a one-off adjustment to the Brexit disruption? An optimistic view would be that UK assets are now cheap and will flourish as the economy settles down to a post-Brexit world of free trade (Chart 2).
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