By Neofytos Hadjineofytou
The inflation level in the UK stands at 10.5%, the highest in 41 years, and the Bank of England set out to bring it to 2% by increasing the interest rate to a 4% a 14 year high!
The covid –19, that had a worldwide impact, and the Russia Ukraine conflict with the soaring coast of energy being the catalyst have been some of the main causes for the existing rise in the inflation.
All around the world we have been seeing raising of inflation, however UK households are facing difficulties with the increased cost of living. Even though an increase in wages occurred it was not enough to keep up with the ongoing increase in prices.
Yesterday, half a million workers from various labor industries in Britain went on a strike over pay and working conditions. The percentage of pay rise offered was 4% or 5% while the current rate of inflation is at 10.5%.
These strikes will influence the UK economy, even though the last GDP measurement of 1% showed consecutive growth along with the previous of 5%, signaling an escape from recession or at least aversion.
Having said that, the IMF forecasted the UK economy to contract by 0.6% this year due to higher market prices imposed on consumers, low employment level and high exposure to natural gas.
As a result, less production and a tighter monetary policy will force less spending and less investment. In return, growth will slow down or even retract and lead to recession should it continue for more than two consecutive quarters.
Adding on to the already frail economic situation a halt from the workforce from both the private and public sector can only make things worse.