The cost of international food is the same everywhere. Costs associated with energy are also rising. However, while inflation in France is 5.6%, it remains above 10% in the UK. It is less than 7% in the Eurozone and only 5% in the United States.
How would you wind up with higher expansion in the UK than Europe or America when the inflationary data sources – food and fuel – are similar?
To be fair, every economy behaves and responds differently. The American economy is extremely
innovative, competitive, and dynamic. Germany depends on a tremendous trading area and an instinctive scorn of expansion that returns to the hours of the Weimar Republic. France is more protectionist, productive, and interventionist; it helps keep inflation low by ordering state-run industries to absorb the damage rather than pass it on to the consumer.
- As a result, higher inflation in the UK shows the inputs—higher commodity prices—and how well the economy can handle these new costs. In the UK, the response was “not very well.”
The British economy must first endure a currency devaluation. Since the Brexit mandate, it has fallen by 20%. Imports will now cost 20% more due to this.
Then, the British government graciously imposed annual costs of tens of billions of pounds for doing business with the EU. The amount of paperwork adds up, and it’s funny that businesses try to pass on the increased costs to customers rather than sucking them up.
However, the labour shortage is the real problem. The UK’s job market is extremely competitive. There aren’t enough people to do everything, from pubs and bars to farmers’ fields and factory floors to the National Health Service. There are more jobs available than the people looking for work.
This drives up some people’s wages and , as a result , prices for everyone, resulting in even more inflation. But it also means, for instance, that if some farmers stop planting crops because they don’t have enough workers, there will be fewer of them, and prices will go up for the lucky few who have crops they can sell.
The end of freedom of movement is directly related to businesses’ inability to hire employees. Brexit sliced off admittance to countless prepared, youthful, sharp, and anxious Europeans. We have replaced them with visas for seasonal and skilled workers, which require more paperwork and cost more on both sides. The program is not filling many of the gaps that employers want to fill, and some jobs do not qualify for it in the first place.
- Increase in productivity would have eased the blow. Putting resources into machines implies lower work expenses and more productivity, empowering organisations to ingest cost rises without any problem. Sadly, however, investment has remained flat since the 2016 referendum for obvious reasons.
All of this indicates that the UK economy is no longer as adaptable. It is less able to handle shocks from the outside, which shows in higher prices.
Therefore, the only real policy is for the Bank of England to raise interest rates to slow economic activity further and stifle price increases. During a time when output is decreasing, and prices are rising, this is hard medicine.
In the end, inflation is only going to go down even more. It is a measure of prices compared to a year ago, and inflation will fall when the significant increase in fuel costs last year is taken out of the equation.
At the point when it begins to fall, it will fundamentally be down to that maths, to more quiet world energy markets, and somewhat down to the Bank of Britain. The expansion would fall further and quicker with a superior-run economy. As well as now, if it doesn’t stop, Rishi Sunak from claiming credits when it ultimately happens.
Dynamic Staffing Services is one of the best recruitment agencies in the UK. We work with Construction companies for hiring skilled manpower for their projects. If you are looking for a skilled workforce for your construction projects, call us at +91-11-40410000 or enquiry@dss-hr.co.uk.
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