Conflict compounds cost of living crisis

Date : 07 April 2022
Inflation for shoppers in the UK continues to accelerate, with large contributions from food, motor fuel and household utilities.

April is expected to deliver a further increase in the cost of living with energy prices rising strongly and National Insurance contributions changing.

Prior to the conflict in Ukraine the Bank of England expected inflation to peak at around 7% over April. The peak is now expected in Autumn 2022 at around 9%. This would be the highest level seen in 40 years, with pressure likely to persist into 2023.

Click chart to enlarge

Our viewpoint is that inflation may go higher or persist for longer than even the OBR believes due to a number of reasons:

  • The long-term impacts of the Ukrainian conflict are hard to predict
  • Rising energy costs are creating complex effects, which will take time to pass through
  • Expansion of the global money supply will tend to lead prices higher
  • Supply chain bottlenecks remain unresolved

Without doubt, inflation is the key strategic threat facing households and businesses, it is unlikely that any will escape completely.

Food businesses are particularly exposed, facing both a difficult economic environment and significant policy changes.

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