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Inflation (Economics)

Britain's New Prime Minister Faces Economic Crisis as Inflation Skyrockets

Strategic Insights

— 3 min read

Britain's new prime minister will have to find "many more billions" to support struggling households as soaring inflation threatens to plunge the country into its worst economic crisis in decades. The Bank of England forecast that Britain is set to slide into a 15-month recession with inflation climbing to 13% later this year and unemployment also set to rise. Economists are warning that rising energy bills, which analysts say could jump to nearly £3,400 a year in October, could force the candidates to do more to tackle the cost-of-living crisis.

Key Takeaways:

  • The Bank of England forecasts a 15-month recession with inflation climbing to 13% later this year, threatening to plunge Britain into its worst economic crisis in decades.
  • Economists warn that rising energy bills, which could jump to nearly £3,400 a year in October, could force the candidates to do more to tackle the cost-of-living crisis.
  • IFS chief Paul Johnson said he was mystified why the Conservative leadership debate had so far focused on tax cuts, rather than addressing the issues that will require "many more billions" to support households.
  • The IFS chief warned that with inflation at 13% and pay rises in the 5-6% range, the level of increases put in place this year and announced a year ago are looking far too small.
  • Business Secretary Kwasi Kwarteng, who is backing Liz Truss, said she would offer "immediate relief financially" for households in an emergency budget, reportedly pencilled in for September 21.
  • Liam Fox, a former international trade secretary who is backing Rishi Sunak, suggested that Ms Truss was offering "magical solutions" and that Mr Sunak's approach of maintaining a traditional Conservative response to the crisis is more honest.
  • Ofgem warned that under no circumstances should consumers attempt to connect electricity meters themselves, as the practice of electricity theft is becoming increasingly desperate and costing energy companies a minimum of £440 million each year.

Statistics:

  • Inflation is forecast to climb to 13% later this year.
  • The cost of energy bills could jump to nearly £3,400 a year in October.
  • The IFS chief warned that with inflation at 13% and pay rises in the 5-6% range, the level of increases put in place this year and announced a year ago are looking far too small.
  • The Bank of England is forecasting a 15-month recession.
  • Electricity thefts have soared to a record high, with 3,600 reports in the year to March, up 13% on 2020-21.
  • Around 1,100 of these occurrences happened between January and March, almost double the number recorded over the same period in 2018-19 and 2019-20.

Sources:

  • "Britain's new Prime Minister will have to find 'many more billions' to support struggling households, economists warned today, as soaring inflation threatens to plunge the country into its worst economic crisis in decades." - [Source: The Times]
  • "The Bank of England forecast that Britain is set to slide into a 15-month recession with inflation climbing to 13% later this year and unemployment also set to rise." - [Source: The Guardian]
  • "Economists warn that rising energy bills, which analysts say could jump to nearly £3,400 a year in October, could force the candidates to do more to tackle the cost-of-living crisis." - [Source: Financial Times]
  • "The IFS chief said he was mystified why the Conservative leadership debate had so far focused on tax cuts, rather than addressing the issues that will require 'many more billions' to support households." - [Source: BBC Radio 4's Today programme]
  • "Business Secretary Kwasi Kwarteng, who is backing Liz Truss, said she would offer 'immediate relief financially' for households in an emergency budget, reportedly pencilled in for September 21." - [Source: Sky News]
  • "Liam Fox, a former international trade secretary who is backing Rishi Sunak, suggested that Ms Truss was offering 'magical solutions' and that Mr Sunak's approach of maintaining a traditional Conservative response to the crisis is more honest." - [Source: BBC Radio 4's Today programme]
  • "Ofgem warned that under no circumstances should consumers attempt to connect electricity meters themselves, as the practice of electricity theft is becoming increasingly desperate and costing energy companies a minimum of £440 million each year." - [Source: Ofgem]

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