Interest Rate Rise – The Economic Outlook for the UK
Much like other parts of the world, the economic outlook for the UK isn’t great. Following a botched Brexit, the cost of living, interest rates and world events cripple the average citizen. At the same time, the Bank of England is stemming the threat of inflation with more interest.
In today’s Queen’s Speech for the opening of parliament, legislation for the cost of living is expected. However, it isn’t yet confirmed, while many Britons get on with a severely reduced quality of life. Recent increases mean people have much less money, which now goes towards utilities, council tax and increased rent for a monthly deficit. And it’s like this for millions of people in the UK. Recently, gas and electricity prices leapt by 60% following OFGEM’s energy price cap increase so suppliers could stay in business through a steady rise in wholesale prices.
Current Interest Rates
But if the cost of living crisis isn’t enough to rub dirt in the face for most, interest rates are set to rise again. Bank of England Governor Andrew Bailey had this to say: “some degree of further tightening of monetary policy might still be appropriate in the coming months” after raising rates from 0.75% to 1% last week. According to financial analysts, interest rates are set to rise between 1% and 2% by the end of the year and as much as 3% into 2023 and 2024. Rising rates are, of course, in response to inflation, which isn’t being helped by current world events.
One of the most destructive current events is the war in Ukraine. Europe hasn’t seen anything like this since World War II. The Russian dictator, Vladimir Putin, is waging an unjust and illegal war on innocent civilians. However, what is clear is the impact the war is having on international finance and the economy. Ukraine alone has requested $1.4 billion in finance from the IMF. With global commodities like wheat and oil at a 14-year high on the CME market.
Heading Into Recession
Recession is a word that all but the most unscrupulous short-sellers like to hear. Yet it remains a constant threat to global and national economic markets. Due to current events and the largest UK cost of living increase since the ’50s, some accountancy forecasters predict a recession is imminent, with Summer 2022 tipped as the starting point. Additionally, consumer spending is down, causing an impact on retail sales, as the country still isn’t fully recovered from COVID-19. Therefore, recession is a real threat when you also consider current global supply chain issues.
A Broken Economy
The phrase “Broken Britain” once referred to the state of society. Still, the term has come to extend right across the national zeitgeist. World events aside, the news is filled with daily segments on “Partygate” and now “Beergate” as UK parliamentarians, high ranking MPs and leaders scramble to fix shattered reputations. The UK economy is broken right across the board. Brexit alone has reduced the average income by up to 1.3%, with staffing shortages of over 200,000 as EU nationals went home, and insolvency rates are double that of last year.
The UK is at the precipice of economic disaster. Interest rates are steadily rising to curb inflation. And the cost of living crisis squeezes income like never before. All the while, Russia’s war in Ukraine increases the once stable prices of essential worldwide commodities.