The UK economy is reeling from three shocks in quick succession: Brexit, Covid-19 and now Russia’s invasion of Ukraine. The Covid-19 pandemic wrought on Britain the sharpest contraction in GDP since 1709, as the Government effectively switched off swathes of the economy in order to halt the virus.
Thanks to an active Treasury response — most notably the furlough scheme — unemployment did not skyrocket. It was a remarkable achievement.
Yet it is in the recovery that Britons now face a cost of living crisis. The cost of fuel, food and shelter was already rising prior to Putin’s war. But today, the Resolution Foundation think tank estimates that conflict in Ukraine could drive UK peak inflation in 2022-23 to more than eight per cent, leaving typical real household income four per cent — or £1,000 — lower than in the year before. This would represent the greatest fall in living standards in 50 years.
All eyes are on the Budget later this month. The Chancellor will be understandably concerned about the public finances, particularly as interest rates rise. But he must work with his fellow G7 finance ministers and others to develop a global response, much like in the wake of the financial crisis, to address the impact of these overlapping crises. The stakes are that high.
On a (sausage) roll
It’s not all bad news. Greggs is back. The iconic high street bakery has once again posted sales of more than £1 billion in a post-pandemic pie bounce back. It even managed to open 131 new stores in a year punctuated by lockdowns.
Let’s raise a sausage roll — vegan or otherwise — to that.
