Boris Johnson’s attempt to reset his troubled prime minister’s office was hit double after petrol prices had their biggest daily rise in 17 years, and a leading international think tank said the UK economy would slow to a standstill next year.
Concerns that Britain is heading for a long period of stagflation since the 1970s have grown amid new evidence of the damaging effects of the war in Ukraine on the cost of living and growth.
The government’s high hopes for a lasting recovery from the Covid pandemic, the Organization for Economic Co-operation and Development (OECD), cited the cost of living crisis as the reason for Britain’s decline in the international growth table. It says the UK will be the weakest economy in the G7’s group of leading industrialized countries next year.
In the latest reversal of inflation, drivers are facing the immediate threat of the cost of filling the average family lounge reaching £ 100 for the first time after the price of a liter of petrol rose from 2.23 pence on Tuesday to over 180 pence.
Data firm Experian Catalist said such an increase on Wednesday would break the £ 100 barrier. Some front yards already sell petrol over £ 2 a liter, including an BP garage on the A1 near Sunderland, which cost 202.9 pence.
Average diesel prices are also at record highs, reaching 186.6 pence on Tuesday, 1.4 pence more than on Monday. Higher diesel prices have a significant impact on the wider economy, as companies typically use fuel to refuel vans and trucks. Prior to Russia’s invasion in late February, gasoline and diesel were hovering around 150p.
As ministers are wary of drivers’ reactions, Downing Street told petrol retailers they could face an investigation by the competition authority if there is evidence that the 5-pound reduction in fuel tariffs liter, announced by Rishi Sunak in his mini-budget for March, is not implemented transferred.
Inflation has already reached a 40-year high of 9%, and the OECD has said it will continue to rise to peaks above 10% later this year.
Despite the demands of some conservative lawmakers, Sunak has no immediate plans to cut taxes and intends to wait for the budget in the fall before coming up with another package of support. The Chancellor and the Prime Minister will outline plans in the coming weeks to stimulate growth through measures such as improving skills and increasing British investment in research and development.
The UK economy will grow by 3.6% in 2022 and have zero growth in 2023, according to the Paris-based OECD, with inflation expected to average 8.8% this year and fall to 7, 4% in 2023
The forecasts contained in the OECD’s half-yearly economic outlook represent a sharp decline from the forecast growth of 4.7% this year and 2.1% next year made six months ago.
Lawrence Boone, chief economist at the think tank, said the UK was affected by a combination of factors, including higher interest rates, higher taxes, reduced trade and more expensive energy.
The OECD says the UK is expected to move from the second fastest growing economy in the G7 industrialized country after Canada this year to the slowest growing in 2023 Japan, Germany, Italy, France and the United States are the other members of the group.
A spokesman for the UK Treasury said: “Thanks to the support we provided during the pandemic, the UK had the fastest growth in the G7 last year and our unemployment rate is the lowest in nearly 50 years. But we recognize that many people will be concerned about these predictions.
“While we cannot completely isolate the United Kingdom from global pressure, our economy is strong enough to meet these challenges. We have a growth plan and we support people with the cost of living. “
Rising gasoline and diesel prices have been blamed for increased fuel demand around the world, including in China and the United States, as Covid’s restrictions weaken. Reducing capacity in refineries also kept pump prices high, while oil fell from peaks seen at the start of the war in Ukraine.
Business Secretary Quasi Quarteng wrote to retailers last month “to remind them of their responsibilities” to pass on tax breaks to drivers. He said it was “unacceptable that different places, even within the same retail chain, have very different prices”.
He asked the Competition Authority to investigate. A spokesman for the prime minister said: “The CMA said that if they found evidence that the redundancies were not being passed on, it would mean that competition was not working and they could launch a formal investigation. Obviously, we would wholeheartedly support them. We continue to consider all possible options. Transparency can play an important role. “
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