- Inflation in the UK is expected to reach what rate in the coming months?
- How has the war between Ukraine and Russia affected the UK economy?
- How has the increase in fuel prices affected the economic situation of British households?
The UK economic recession 2022 is gaining new dimensions day by day. The increase in gas and food prices will increase inflation in the UK to 11% by the end of this year, and this trend of increasing inflation will also continue in the next year. The UK is on the brink of a recession for households as rising prices undermine consumer confidence and force people to cut back on spending.
UK economic recession 2022: Rising inflation expectations in the UK
The UK economic recession 2022 has put pressure on British households. In an interview with the Guardian, Stephen Millard, the deputy director of the National Institute of Economic and Social Research, said: “the economy would contract for three consecutive quarters, shrinking the 1% by the spring of next year.
Stephen Millard added there would be no respite for British households and businesses from “astronomical inflation” in the short term, and “we will need interest rates up at the 3% mark if we are to bring it down”. The Bank of England’s base interest rate is currently 1.25%, which has increased from 1% in June. Experts have predicted that inflation in the UK could reach 15% from the beginning of 2023, which is the leading cause of the increase in fuel and food prices.
British inflation warning to 11% by the end of this year
Inflation in the UK will increase significantly next year, and families will continue to face the crisis of rising living costs. According to the National Institute of Economic and Social Research forecast, the increase in gas and food prices will increase inflation to 11% by the end of this year. Official data showed inflation in June at 9.4%, the highest since February 1982. The UK economic recession has led to increasing inflation in this country.
The decline in the performance of private sector services
The UK economic recession 2022 has overshadowed the performance of the private sector in this country. In its latest report on the financial situation of the UK and private sector companies, the McGraw-Hill Economic Institute has announced that the services of this sector are at the lowest level since the quarantine of the winter season in 2021. Tim Moore, economics director at S&P Global Market Intelligence, says that the decrease in the purchasing power of consumers and the activity of businesses due to the increase in inflation has caused a decline in demand in all industries and companies in the UK.
The astronomical increase in fuel prices
According to the Resolution Foundation, the price of some goods, such as fossil fuels, has decreased to some extent, but the cost of gas is still high, and forecasts indicate that the fuel price will reach the ceiling of £3500. Indeed, inflation will remain high until this autumn, reaching another peak in October (8.7%), when Ofgem is expected to raise the energy price cap.
The British economy is involved in the challenge of the Russia-Ukraine war.
The Organization for Economic Co-operation and Development (OECD) announced in its annual assessment of the UK’s situation that the country’s economy is experiencing slow growth and high inflation, which has led to a labour shortage. Mathias Cormann, the OECD’s secretary-general, said: “Like other economies around the world, the UK economy faces some headwinds, with pre-existing structural challenges magnified by the pandemic and Russia’s war of aggression against Ukraine. The key to stronger economic growth and better opportunities will be stronger productivity growth.”
Bankruptcy prediction of 500,000 UK small businesses
The Federation of Small Businesses (FSB) chairman has warned that up to half a million small businesses in the UK could go bankrupt within weeks if a new package of government aid is not delivered immediately. The head of the Federation of Small Businesses (FSB), Martin McTague, has warned that up to 500,000 small businesses in the UK could go bankrupt within weeks if a new government aid package is not delivered immediately. He added that we have no problem with how the head of the treasury deals with the needs of consumers. But there is still a big problem with small businesses.
Weakening GDP growth
The CBI explained that this situation results from historical pressure on household incomes, reducing consumer budgets. This confederation wrote that household stagnation would come, making business investment more necessary. The group added that the decrease in household budgets would, in turn, weaken the GDP growth at the end of this year and in the first half of next year. The UK economic recession has ruined the country’s economic outlook.
The UK’s economic outlook has worsened since the start of this year, and lenders have been asked to set aside more capital to absorb shocks in the markets. The price of essential goods such as food and energy has risen sharply in the UK and globally, and the growth outlook has worsened. The decrease in the purchasing power of consumers and the activity of businesses due to the increase in inflation has caused a decline in demand in all industries and companies in the UK.
