Good news! The rate by which prices are rising is increasing but by less than in previous months. Yes, that still takes inflation (9.1 per cent) to a 40-year high and sure, the Bank of England is forecasting 11 per cent by the autumn. But you take your wins where you can get them in 2022.
Not least because energy market analyst Cornwall Insight now projects that the price cap – which alongside food and fuel is the main driver of inflation – is set to rise by roughly 50 per cent in October, taking the average household bill to £3,000 a year.
Of course, countries the world over with governments on the left and right are suffering from high inflation as a result of the post-pandemic supply crunch and Russia’s invasion of Ukraine. For goodness sake, even Japan saw prices rise by 2.1 per cent in April. But Britain boasts the highest inflation in the G7. Why?
A new report from the Resolution Foundation think tank seeks to answer this question with reference to the one thing Britain has done that no other country has – leave the European Union. The paper steers clear of hyperbole but it does not pull any punches either. It suggests that the Brexit vote contributed to a rise in the cost of living “equivalent to a £870 increase... per year for the average household.”
And its modelling projects that over the next decade, the Brexit deal itself, or to give it its full title, the Trade and Cooperation Agreement (which has generated substantial reductions in both trade and agreeableness since its inception), will lead to a fall in real wages equal to £470 per person each year, compared to a world in which Britain had remained in the EU.
To be clear, this is not to say that in the absence of Brexit, households would not be experiencing higher prices and falling living standards. Put another way, there are lots of reasons to be down about the UK’s present and future growth prospects that don’t involve our trading relationship with Europe.
Moreover, it’s not as if the period between the financial crisis and the Brexit vote represented the glory days of economic growth and real-wage rises (it’s almost as if the two events are not wholly unrelated). But it matters. Far from morphing into a ‘Global Britain’, Brexit has made our economy more closed and less trade-intensive.
We know by now that Brexit is not an event, but a process. When it comes to thinking about its economic impact, the Resolution Foundation puts it in this admirably pithy but undeniably depressing way:
“Brexit is better thought of as a broad-based reduction in workers’ pay and productivity.” Ouch.
These strikes will pass, and inflation should eventually fall back to manageable levels. But the challenge for policy-makers, Conservative and Labour, is to first understand the impacts of Brexit and then to manage them in such a way that we can leverage Britain’s very real economic strengths and avoid a second successive decade of real-wage stagnation.
In the comment pages, Defence Editor Robert Fox warns that fighting Russia in Europe is a possibility — we must re-think our army. While Jochan Embley says Beyoncé’s new release makes him hungry for more.
And finally, was there ever anything more joyous than seeing Serena Williams back on a tennis court? She’s playing doubles in Eastbourne this week, and her partnership with Tunisia’s Ons Jabeur is all you’d want it to be.
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