The Bank of England increased its rate on Thursday for the fifth time in six months, to 1.25 %, while the economy borders on the recession.
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Social growl grows in the United Kingdom. The London metro was completely immobilized on June 6 by a very followed strike. A new stop day is expected on June 21. Intercity trains will also be strongly disrupted next week, with three days of strike announced. Less than half of the usual traffic must be ensured. The unions also planned a demonstration in London on Saturday, June 18, to denounce “the cost of living crisis”.
“Pressures on households worsen, denounces Frances O’Grady, the secretary general of the Trade Union Congress, the main union confederation. Filling up a family car now costs more than 100 pounds [116 euros] , and many poorly paid workers can no longer afford to drive. Electricity and gas bills increase twenty-three times faster than wages. And next year, the OECD [Cooperation and Development Organization economic] provides zero growth for the British economy, the worst performance of the G20 with the exception of Russia. “The OECD, which reaches low but positive growth in the euro zone in 2023 (+ 1.6 %) and in the United States (1.2 %), anticipates only 0 % across the Channel.
As everywhere else, the United Kingdom undergoes the backlash of war in Ukraine but the shock is a little more intense. On the one hand, inflation flies away: it reached 9 % in April. On the other, growth undergoes a serious brake. The economy may have already entered recession, even if economists are competing for the issue. The gross domestic product fell in March (- 0.1 %) and in April (- 0.3 %) (the British statistics office now calculates a monthly GDP), and the Bank of England provides for a decline of 0, 3 % in the second quarter. In all cases, the United Kingdom therefore crosses a period of stagflation (stagnation and inflation combined).
no “price shield”
Trying the balance between these two forces, the Bank of England announced, Thursday, June 16, the fifth increase in its interest rate since December. This increased by 0.25 point, to 1.25 %. Three of the nine members of its monetary policy committee wanted to go faster, offering an increase of 0.5 point.
For the British, the “shock of the cost of living” really materialized on 1 er April, when the new regulated price for gas and electricity has entered into force . The leap was unprecedented: invoices increased by 54 %. Across the Channel, no “price shield”: the prices outbreak on the wholesale markets is passed on as a whole, with a new regulated price calculated twice a year (in April and October).
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