My current view of the UK economy.

It is based on Tim Morgan’s explanation of how the UK economy works.

 Think of the formal economy as employed people undertaking discretionary and essential activities in a system where discretionary activities are declining.

Discretionary activities are becoming increasingly unaffordable because the energy cost of obtaining energy is increasing, and prosperity is declining.

People in the formal economy undertaking discretionary activities must move to the informal economy.

The informal economy refers to activities outside the formal, regulated systems, such as government oversight and taxation.  This sector includes small-scale, unregistered family-based businesses, casual labour, self-employment, barter systems, and non-monetary exchanges.

The informal economy will increasingly play a crucial role in the future by fostering entrepreneurship, sustaining communities, and providing essential goods and services outside traditional business channels, leading to the emergence of interconnected local economies.

The formal economy will still exist, albeit shrinking relative to the informal economy, because the informal economy will be self-sufficient and have less need for services previously provided by the formal economy.

An outstanding question in this view of the economy is the rate at which these changes will occur:    This depends on the growth rate or shrinkage of the whole economy.

The recent budget set by the UK government contained policies that were wholly dependent on achieving growth.  Alternatively, Tim Morgan’s Surplus Energy blog demonstrates that the economy is shrinking.

Whichever proves to be correct, the eventual disappearance of discretionary activities in the formal sector and the growth of the informed economy are inevitable,

We are heading towards a future similar to the 1950s.