Fuel Inflation
Rising crude oil prices on world markets and fuel prices are other factors contributing to rising inflation in the UK. In March, the price of a litre of petrol increased by 4.3 pence as compared to a similar period last year to one pound and 23 pence. The price of a barrel of crude oil last March reached its highest level in 10 months. The World Bank also predicts that energy prices will rise in 2021 and 2022. According to the World Bank, energy prices in 2021 are expected to average more than a third higher than in 2020, and the average oil price will be $ 56 per barrel. Energy prices will increase to $ 60 per barrel in 2022, which will be the same as the average prices from 2017 to 2019.
Food & Clothing
“Inflation peaked in March due to rising fuel and clothing prices, but food prices have been lower since the onset of the pandemic,” said Jonathan Athow, the UK National Bureau of Statistics’ deputy for economic affairs. He predicted that inflation would rise in the coming months due to rising crude oil prices. Bank of England also forecasts that inflation will reach 1.9% by the end of this year (2021). The UK inflation rate is currently estimated at 1.5%. Recently, a video of a long line of people waiting to receive packages in North-West London was released online, showing an unprecedented increase in the number of people in need of food banks in the British capital. Earlier, the National Bureau of Statistics reported that the economy had suffered the largest annual loss in nearly three centuries last year, with a 9.9 % drop due to pandemic restrictions.
Fragile People
Of the 27.7 million adults in the UK, signs of vulnerability, including declining health and declining finances, show an increase of 15% since March last year. This British institution reports the financial situation of the country in February every year, including the working conditions of companies, market health and consumer rights. To prepare this report, a survey of 16,000 people in March of last year and 22,000 people in November of this year was conducted to examine the effects of the pandemic on the living conditions of British families. Research shows that many people have been forced to cut back on working hours and wages or be furloughed in order to stay employed. Offices have found that 27% of working people are paid through the government’s economic support package (which pays 80% up to £2,500) and that one in six people have reduced their working hours. Also, the number of people who do not have a good financial situation has increased from about 10.2 million to 14.2 million.
Research shows a significant decline in people’s financial situation due to the Covid-19 pandemic. Eleven per cent of the British adult population, struggling to repay, have little savings and severe financial turmoil. Working youth, meanwhile, have suffered the most.
Experts Claims
Nisha Arora, Director of Consumer and Retail Policy, says the financial pain of the pandemic has not been evenly distributed, with young people and minorities becoming more vulnerable than average during restrictions imposed since last March. She added that the situation is likely to have worsened since the polls.
Tom Selby, a senior economic analyst at the AJ Bell Institute, said: “Offset statistics show the profound and terrifying consequences of the pandemic on the lives, jobs and savings of people in the UK.”
According to the study, UK economic growth fell by 9.9% in 2020 due to three rounds of nationwide quarantines and massive business closures. The report also states that over the past year, more than 800,000 people have lost their jobs despite government funding. British Budget Chancellor Rishi Sunak says the country’s economy has been hit hard by the pandemic and many families and businesses are currently going through difficult times. He expressed hope that the budget amendment would include more support packages for this issue. Sunak, however, also pointed to the staggering increase in debt and declining government revenues, saying that if the restrictions continue, the government will not be able to provide financial support to all businesses and companies.
The UK, the main source of Covid-19 in Europe, has more than four million cases and 127,000 deaths. It also has the highest rate of vaccination in Europe and about two-thirds of the population has been vaccinated so far. “A health crisis soon engulfed Britain and the world, causing a full-blown economic crisis,” said Hitesh Patel, a director at Kilter Investors. The fact is that no country was prepared to face such a thing, and it should be noted that things may get very bad again. Everyone should focus and try not to have the bad economic performance of the previous year, but it is clear that the restrictions will continue for the time being, and this will affect businesses and households. The National Bureau of Statistics recently reported that the country’s gross domestic product fell by 9.7%, the biggest blow to the British economy in 300 years.
The bankruptcy of more than 17,000 companies in the year before the pandemic in the UK reflects some of the economic realities of recent years, which have been exacerbated by Brexit and Covid. “People are feeling economically insecure now,” said Rodney Shakespeare, a British analyst. The British system is now challenged at home and abroad, the economic and political situation is deteriorating and the government has not proposed any new practical economic policies to get out of this situation. He described the vote to leave the European Union as a cry of disgust at the current economic situation, adding: “British diplomats know that the country’s exit from the EU will be to the detriment of the country, at least in the medium term, and the EU to increase spending.” Separation from the union will be difficult for Britain.
The International Monetary Fund (IMF) in April projected that global net government debt as a percentage of GDP will increase from nearly 70% to more than 85%. Among developed nations, the figure is expected to increase from 77% to more than 94%, driven by double-digit increases in the debt of Canada, France, Italy, Japan, Spain, the United Kingdom, and the United States.
Spiking Prices in Housing Sector
Contrary to previous expectations, housing prices in Europe’s second-largest economy have been on the rise, with the average housing price rising by 1.6% (3,770 Pounds) in July to 241,604 Pounds in July, a new record. It is considered from the time of recording the relevant statistics. Housing prices in the UK have risen 3.8% since the beginning of the year. In addition to housing, prices in other sectors have risen to the point where the country’s annual inflation rate rose to 0.4% by the end of July, up 0.4% from a similar period last month. Russell Galli, director of the Halifax Institute, said: “After four consecutive months of falling house prices, we saw a sharp rise in July, and it seems that more than an increase in demand, a decrease in supply has led to a significant increase in prices. As a result of the corona outbreak and severe disruption to trade, some British investors have opted to move their assets to safer destinations such as gold and housing. London is still the most expensive area in the UK in terms of house prices, while the north is relatively cheaper.”
“Demand for all homes has increased, but new homes have become more popular with buyers than any other home,” said Jeremy Leaf, a housing dealer in North London. Despite the strong demand, we have seen that supply has decreased compared to previous months. The future of the housing market will largely depend on how long the effects of the pandemic on various sectors last, so current evidence does not provide an accurate estimate of the coming months.
Alarm over Increasing Inequality
According to The Guardian, a recent study by the Resolution Foundation shows that 25% of Britain’s total wealth is held by only the richest 1%. “The situation is a wake-up call for rising inequality in the country,” it said. The institute’s report shows that the real wealth of the richest one percent of British society is 800 billion pounds more than the figures announced by the British government. Of course, this figure is also estimated, and the exact amount can be even higher than this figure, says the institute.
The British think tank says that while the government claims that the richest one percent of the population owns 18% of Britain’s total wealth, the actual figure is about 25%. The agency called on the British government to reduce the tax exemption on inheritance and wealth taxes and even to impose a tax on the assets of the richest one percent of the country. The Resolution Foundation says the move, along with providing more funding to meet the costs of older people in the country, could pave the way for a more effective response to the coronavirus. Rising property prices in the UK since 2008 have seen 93% of the wealth generated in the UK come from rising assets such as property and housing. Economists at the institute say given that Britain has been under economic pressures for almost a decade, now is the time for London to take a better approach to taxing the rich. According to a study published by a British think tank (Resolution Foundation), British households that have lost their jobs due to Covid-19 have experienced a greater income decline than French and German households. Because, according to the think tank (which focuses on issues affecting low-income households), social security in Germany and France is more generous and their income is more equal. Reuters reports that 41% of British households who lost their jobs during the pandemic, lost at least a quarter of their income, compared with only 20% of the newly unemployed households in France, according to the British think tank. They have experienced such a big drop, and in Germany the figure has been 28%.
According to the report, those British households whose incomes have fallen became twice as indebted as German and French households for living expenses. “Britain’s rapid vaccination means that while the income crisis is easing faster, the fundamental weakness of the household economy poses risks to the future,” said Maja Gustafsson, an economist at the think tank.
On 3 March, British Chancellor of the Exchequer Rishi Sunak announced an extension of the government emergency subsidy due to the Covid-19 pandemic of (20 Pounds) a week for low-income households for just another six months. In another part of the think tank’s report, it is also stated that during the crisis, up to 33% of households were forced to reduce their expenses, while in France and Germany this figure was 23% and 21% respectively. It raises the question of the strength of the British economic recovery after the lifting of restrictions. The British think tank concluded that the sharp drop in British household spending was due to the country’s tighter Covic restrictions, which lasted longer than in France and Germany, and extended the duration for the family’s poor finances.
Frail Hope
The UK economy shrank 1.5% in the quarter to March, down 0.4% from the previous month, the Statistics Centre said in a report. On a monthly basis, the British economy grew by 0.2% in March. Last year, Britain’s economy shrank by 10%, the worst performance in three centuries, and one of the lowest growth rates in Europe and the world. The British government has so far been forced to quarantine the nation in three stages and restrict trade and economic activities. Production and trade figures have become more promising, especially in the area of ​​foreign trade, as Britain’s trade with the European Union and the United States has risen sharply since March, giving activists hope for stronger economic growth. In March alone, government revenues fell by £28 billion from the previous month. The only news for the British economy this month is that the retail sector has experienced a positive growth of 5.4%. With the end of the second wave of the outbreak in the UK, many businesses have reopened, but their capacity has not yet returned to pre-pandemic levels.
Final Word
According to civil society organisations in the UK, the economic weakness has also had a devastating social impact, with a report by Just Life showing that the number of homeless people in the country exceeded 51,000 three years ago. Declining investment, inability to compete with competitors, declining GDP, rising inflation and consumer reluctance to buy have been the hallmarks of the British economy for several years. For more than a decade, the British government has pursued austerity, reduced public services and increased taxes. Despite all these measures, the British government, with more than $ 9 trillion, preceded by the United States with $ 18 trillion, has become the most indebted country in the world. The pandemic crisis since last year has also taken a heavy toll on the economy. The latest data from the British National Bureau of Statistics shows that the British economy last year (2020) experienced the most annual losses in nearly three centuries. Differences between the Covid-induced economic situation and London’s withdrawal from the EU are not well defined. Although all European countries are in an economic crisis caused by the virus, statistics and polls show that the UK is in the worst position in all respects compared to all OECD countries.
