5 recent developments you may want to know about the UK economy

Highlights

• Retail and manufacturing costs have been soaring lately in the UK, resulting in higher prices for customers.
• Labour has recently warned that an annual increase of £10 billion in annual petrol and diesel costs is ahead of Britons amid the ongoing cost-of-living crisis.
• Due to declining retail sales accompanied by a cost-of-living crisis and a weak economic set-up, the pound has now reached an 18-month low against the US dollar. 

The UK economy has been going through a roller coaster ride lately. The inflation levels have been skyrocketing in the country, and the supply chain issues have been rising due to the impact of the Russia-Ukraine war. A full-fledged cost-of-living crisis has been growing in the UK and the households have been struggling with paying all their bills, including energy and food.

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Let’s look at 5 things that are currently happening in the UK economy.

1. Soaring retail prices

The living costs have been escalating in the UK, with the inflation level recently hitting a 30-year high of 7% in March. The supermarkets are planning to forward the rising costs to the customers and thus the customers are set to face the brunt of rising prices of items ranging from bread to iPhones.

By the end of this year, the inflation level in the UK may even cross the 10% mark, as per the Bank of England. Affording healthy food is becoming a challenge for UK households as retail prices have been going up due to high costs of inputs, including raw materials and energy.

2. Rising manufacturing costs

The manufacturers in the UK are becoming more and more pessimistic as they are struggling to tackle the sharpest surge in their costs since 1975. According to the latest CBI report, the UK manufacturing businesses are cutting back on investment and are preparing to forward the higher costs to consumers, as mentioned above. Consumer confidence has been falling and the overall market sentiment has been worsening due to the rapidly increasing costs. The Russia-Ukraine war has further deteriorated the supply chains for the sector.

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3. Hike in petrol and diesel costs

Labour has recently warned that an annual increase of £10 billion in annual petrol and diesel costs is facing the UK households amid the ongoing cost-of-living crisis. The budget of Britons, which has already been shaken due to rising energy and food bills, is set to weaken further.

According to the calculations done by labour, there would be an increase of £4.2 billion in diesel costs and £6 billion in petrol costs for the UK drivers, as compared to the last year. In his spring statement, Chancellor Rishi Sunak did reduce the fuel duty by 5p, but this has been countered by the rising prices, leaving the move insignificant.

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4. Fall in Government borrowings

According to the latest figures released by the Office for National Statistics (ONS), £151.8 billion was borrowed by the public sector in the year to March, which is not even half of the amount borrowed last year. In the previous 12 months to March, the borrowing of the public sector stood at £317.6 billion. Even though the present borrowing is at the third-highest level since 1947, it is accompanied by an increase in tax collection. According to experts and economists, the Boris Johnson government investment would be revised downwards amid the supply chain problems creating hindrances for the construction projects at present.

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5. Pound going down

Due to declining retail sales accompanied by a cost-of-living crisis and a weak economic set-up, the pound has now reached an 18-month low against the US dollar. Hitting its lowest level since September 2020, the pound was down by 0.74% on Monday, while the anticipation of rate hikes in the US uplifted the dollar. According to analysts, the Bank of England may not go for as much monetary policy tightening as compared to the Fed and other central banks in order to tackle the inflationary situation.

Tags: inflation, Bank of England, Fed, rate hike, retail, manufacturing, war, energy bills, food bills, government borrowing