LONDON, England: Amidst a heatwave, rising inflation, and increasing energy bills, the UK is facing the worst downturn among developed nations, except for Russia.
With the addition of health service backlogs due to COVID-19, staffing issues, as well as strikes by railway workers and local government staff, most workers can only hope to maintain their spending power amidst a real cut in income.
Yet, there are some glimmers of hope coming from the business community.
This week, the Society of Motor Manufacturers and Traders said supply chain blockages are easing somewhat, and there is the prospect of a full-year increase in UK car production output, as supply chains ease in the second half of 2022.
While supply issues are loosening, they have not been solved, affecting slightly less than half of UK businesses, down by four percentage points.
Other main concerns are the costs of energy and the availability of staff, with 86 percent of UK firms with vacancies stressing they are proving hard to fill, while 40 percent of businesses expect to reduce their operations this year as a result of higher energy prices, up from 33 percent in the first quarter.
Under-capacity is also being witnessed by the hospitality and retail sectors, affected by recruitment difficulties exacerbated by Brexit.
The Office for Budget Responsibility said due to Brexit, the UK would be operating 4 percent below its trend growth.
Therefore, a further four in 10 firms are cutting back due to fuel bills, leading to lower productivity and earnings and fewer jobs, and businesses have not been protected from rising fuel bills by price caps that apply to domestic customers.
Energy costs are also increasing household budgets, with the latest projections placing annual average household fuel bills reaching 3,800 pounds from January, highlighting the impact of Russia cutting its gas supplies to the European Union.
Therefore, with prices rising more than eight times, compared to one year ago and twice as high as last month, the effects will be felt by winter’s energy market and those planning household budgets.
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