OWhat will the Chancellor do when UK economic growth figures in February show the pandemic recovery was almost at a standstill before the invasion of Ukraine began?
Shopping and dining have become popular again after the easing of restrictions put in place to deal with the Omicron outbreak. Reservations at arts and entertainment venues have increased. And the banking, insurance, legal and accounting sectors saw another month of solid expansion, arguably allowing City businesses to renew in 2022 the stellar bonuses paid to staff last year.
However, the manufacturing sector shrank, as did the wider production sector, as energy-hungry companies cut gas and electricity consumption to leave GDP just 0.1% higher and lower. february.
Consumers were also beginning to feel the effects of rising heating bills. The better-off may have ventured out to restaurants or to catch a show, but separate figures from the Bank of England show many families increased their credit card borrowing in February just to keep their heads out. some water.
Trade with Europe rose slightly month-on-month, which some analysts said was a welcome sign of a return to more normal post-Brexit times.
That was not the view of the British Chambers of Commerce (BCC), which said a broader view of imports and exports with EU countries showed that UK businesses were still struggling with bureaucracy. left in place following the decision to leave the EU single market and customs union.
Clearly, the lines of lorries in Dover, some with rotting meat and vegetables on board, have nothing to do with the cost of living crisis or the war in Ukraine and everything to do with the decision of the Prime Minister to push for a hard Brexit.
Rishi Sunak, meanwhile, is frustrated that his demands for further action do not recognize all the subsidies he has put in place in recent months.
There is £22billion of government support, he says, ranging from cutting fuel taxes by 5p, at a cost of £2.4billion, to freezing taxes on alcohol which will cut £3billion from government revenue over five years.
Of course, most of the £9billion household energy subsidy is in the form of a loan and will be clawed back by the Treasury. Nonetheless, he argues that the whole package does enough to keep the economy afloat.
Business groups are clear that the gravity of the situation means he must go further, especially now that Russia’s invasion is about to drag on, leading to new sanctions against the aggressor .
Not only should there be a cap on household energy bills, there should also be a cap for small businesses, the BCC said.
The Confederation of British Industry has said there should be more generous allowances to boost investment in new factories and machinery and a revised apprenticeship tax, to circumvent the bureaucracy created by Theresa May’s failed plan to stimulate on-the-job training.
Sunak, still grappling with revelations about his personal finances, is expected to remain seated. Meanwhile, inflation is soaring and the Bank of England has signaled that its response will be to raise interest rates again in May.
This all adds up to an even bigger cost of living crisis in the months to come.