THE BLAME GAME
An opinion poll of 1,977 UK adults, conducted by Opinium, shows a solid majority of the public believes the current government to be responsible for the current shortages. However, further analysis of the data also indicates a clear split of opinion depending on whether the respondent voted for Brexit or to Remain in the EU, This suggests that Brexit will continue to be a hotly divisive issue. This is pertinent since a number of indicators point to shortages of many commodities continuing well into 2022.
Supply-chain problems continue in the UK. This has resulted in shortages of fuel, a wide range of supermarket goods; car parts; and a long list of many other products. The past few days have also witnessed long queues at petrol station forecourts due to panic-buying of fuel particularly in London and parts of Kent. Northern parts of England have no queues. According to Heritage Pay research, there is no actual shortage of fuel. The CEO of BP issued a statement on Friday saying due to a shortage of truck drivers, his company would close some petrol stations. The total number of filling stations impacted was around 100. The UK has over 8,500 petrol stations. Furthermore, the fuel situation appears to be returning to normal.
According to the latest official data, the UK Consumer Price Index (CPI) which measures inflation surged by 3.2% in the 12 months to August 2021. This is the largest ever month-on-month increase since records began in 1997. This comes at a time of rising energy prices and is, according to the Bank of England expected to worsen to 4% before the end of the year. Other, more pessimistic, analysts – citing supply chain staff shortages – are predicting a 4.5% rise by year-end. Some components of CPI, such as used cars have already gone up by 18.3%.
CONFIDENCE All of the above comes at a time when the UK Services PMI – one of the most important measures of the economic health of British businesses has shown slowing growth for the fourth month in a row. While the index itself is still in positive territory, this data comes at a time when the government furlough scheme has just ended, which could potentially give rise to unemployment. So to avert a perfect storm of stagflation (characterised by rising unemployment, rising inflation, and slow growth) in the months ahead, the Chancellor, Rishi Sunak will need to make some significant policy announcements. The Autumn Statement on the 27th of October will be a key date for the restoration of confidence.