Inflation is particularly acute in the United Kingdom, triggering a cost of living crisis for British households. Comparing like for like in core inflation rates, which strips out the first-round impact of volatile food and energy components, inflation is 1.6 percentage points higher in the UK than in Germany, nearly 3 percentage points higher than in France, and more than 3 percentage points higher than in Italy. Instead, UK core inflation is catching up with core inflation in the US, despite the US having had much greater fiscal stimulus and labor market disruption than the UK (or EU) during 2021.
We believe that Brexit is the primary driver of the high and widening inflation differential between the UK and its European peers shown in the chart: Brexit has amplified the inflationary impact of a simultaneous common shock. By ending the free movement of EU migrant workers to the UK, the UK government has unilaterally cut the labor supply and its elasticity. By adding new tariff and nontariff trade barriers, the British government has slashed purchasing power and available imports, and it has created inflation during the staggered implementation of the Brexit deal. The UK officially exited the EU in December 2020. By creating uncertainty about UK economic policy and investment prospects, Brexit has weakened the anchor for inflation expectations.
This is wrong, totally wrong. The driver for this round of inflation is the banking crisis back in 2008/9 when the world’s governments started printing money hand over fist to help the banks survive. They called it Quantitative Easing, everyone else called it stoking up inflation. The only thing that kept inflation in check since then was the ludicrously low interest rates. As soon as these started to go up, so did prices. Don’t blame this government for not doing anything about inflation, there’s not much they can do. It’s all down to the Bank of England not stopping QE earlier on.
Oh I’m not bashing anyone, I just found the article and thought it made interesting reading - comparing how we are doing with regard to other countries. I don’t know anything much about Quantative Easing to be honest
The reading was up from 9.0% in April and matched the consensus of a Reuters poll of economists. Records from the Office for National Statistics show May’s inflation was the highest since March 1982 - and worse is likely to come.
Some investors judge Britain to be at risk of both persistently high inflation and recession, reflecting its large imported energy bill and ongoing Brexit-related friction which could further hurt trade ties with the European Union.
“With the economic outlook so unclear, no one knows how high inflation could go, and how long it will continue for - making fiscal and monetary policy judgements particularly tough,” said Jack Leslie, senior economist at the Resolution Foundation think tank.
Earlier on Wednesday the Resolution Foundation said the cost-of-living hit for households was being compounded by Brexit, with damaging long-term implications for productivity and wages. read more
Britain’s headline inflation rate in May was higher than in the United States, France, Germany and Italy. While Japan and Canada have yet to report consumer price data for May, neither are likely to come close.
Obviously, I blame BJ - he can’t look after his own finances so looking after a country’s is well beyond his capability. The PM is all talk and no trousers - and he’s got no trousers because they keep catching fire …
Thanks for this @Percy_Vere I’m getting the gist of it, but I’ll read it over again to make sure I fully understand it all.
So, do you think Brexit has had any impact on our current situation?. I mean, the article I posted said it was a “primary” driver, but you say its QE…I’m just curious. Is this article utter tosh?
I agree that BJ should stop swanning off to other places and concentrate on the UK.
I like your article…they did feel Brexit was to blame, but also the Central Bank are going to try to restrain the rate of inflation as much as possible too…does this mean more money? I wonder how much debt we (as a country) are in already…its a scary thought.
Blame who you like Omah, but it’s Rishi that looks after the financial books not Boris.
I don’t think Brexit had anywhere near as much impact “on our current situation” as that article suggests and, as far as I’m concerned, Brexit isn’t, and never has been, a primary driver of inflation. Over all, IMHO, that article is very choosy with it’s “facts” rather than utter tosh but, it’s a close decision.
UK general government gross debt was ÂŁ2,382.8 billion at the end of 2021, equivalent to 102.8% of gross domestic product (GDP)
I think with most articles in the public domain & media, each bit has its own agenda to push. This is why I like to get an opinion from all sides so I get a fuller picture of everything (especially things I don’t really understand much about, heh!)
He has to get the final ok from Boris though, doesn’t he? I mean he can’t just go willy nilly spending and saving as he sees fit…
Oh and that link…it gave me a fright really…those figures are horrendous. How on earth are we going to pay that back?
Ask the Labour Party, they say they’ve got the answers to all our fiscal woes (that magic money tree they have stashed away somewhere). Seriously, I’ve heard that it’s inflation that actually pays down debts of that size. I don’t know how that works though.
Agreed, they could start by reducing VAT on fuel and energy. However, while they’re “not doing anything”, the size of our national debt is actually failing because tax receipts are going up and they’re spending proportionally less of that extra income.
Brexit’s Legacy Is Hotter UK Inflation Risk for Years Ahead
The UK will be stuck with searing inflation for years because of Brexit, according to strategists at Wall Street’s top banks.
Citigroup Inc., Bank of America Corp. and Standard Bank all see the UK as a outlier in the developed world because of the economic damage wrought by the decision to cut ties with the European Union. Even as price pressures start to fade elsewhere, they say UK inflation will be higher-than-normal because of immigration controls and supply chain disruption. A report Wednesday showed price pressures hitting a fresh four-decade high.
Inflation is a big reason why investors are bearish on the pound, even with the currency trading near a two-year low to the dollar. The view among experts is that Brexit isn’t the cause of the cost-of-living crisis, but it will make solving the problem harder in the UK than anywhere else.
The Office for National Statistics reported on Wednesday that consumer prices rose accelerated to 9.1% in May, from 9% a month earlier. The pound weakened 0.3% to $1.2243.
Experts say it’s hard to know to what degree the UK’s economic woes are caused by the pandemic or the aftermath of Brexit. Some research suggests Brexit is already taking a toll. Trade barriers have driven a 6% increase in UK food prices, according to a report from the London School of Economics.
Replacing access to the EU’s single market with labor and goods from elsewhere remains a challenge for the UK government, which has struggled to make headway on trade agreements. While the UK signed its first agreement with a US state last month, the piecemeal approach shows talks are failing to progress.
Remember that the Western Banking, indeed to all intents the whole world’s banking is based on Fiat Money only. This is due to America reneging on the PROMISE that the American government made at the Bretton Woods conference. We have so very much to thank America for — NOT.
The mistake was paying for every one to stay home in covid, its got to be paid for, dropping VAT will not bring in the money, every thing a government says and does has an effect down the line, we’ree feeling that effect now.
Brexit will be blamed because it can, if we were to have remained staying would have been blamed for not allowing us to control our own finances.
ETA should have quoted Percy vere.
It was BJ’s government which introduced “furlough” (previously a rarely used term in the UK) - 11.7 million employee jobs were furloughed through the scheme, at a cost of £70 billion. Formally named the Coronavirus Job Retention Scheme, it funded businesses to continue paying up to 80% of employees’ salary for those that would otherwise have been made unemployed.
Exactly my point, some one has to pay, cutting taxes will not keep money going into the treasury .The sanctions against Russia were a knee jerk, no thought to the consequences to the west, if we’re happy with them then we have to happy with what happens to our pockets, brexit or otherwise will not effect this but enough noise will convince it does.
Seriously, I’ve heard that it’s inflation that actually pays down debts of that size. I don’t know how that works though.