Boris Johnson’s try to reset his troubled premiership has acquired a double blow after petrol costs had their greatest every day rise in 17 years and a number one worldwide thinktank stated the UK financial system would sluggish to a standstill subsequent yr.
Fears that Britain is heading for a chronic interval of Seventies-style stagflation intensified amid recent proof of the damaging affect of the battle in Ukraine on the price of residing and progress.
Dashing authorities hopes of a sustained restoration from the Covid pandemic, the Organisation for Financial Co-operation and Improvement (OECD) singled out the price of residing disaster as a reason behind Britain’s slide down the worldwide progress league desk. It stated the UK could be the weakest financial system within the G7 group of main industrial nations subsequent yr.
Within the newest twist to inflation, motorists are confronted with the approaching menace of the price of filling the common household saloon hitting £100 for the primary time, after the price of a litre of petrol rose 2.23p on Tuesday to greater than 180p.
The info agency Experian Catalist stated an analogous enhance on Wednesday would end result within the £100 barrier being breached. Some forecourts are already promoting petrol above £2 a litre, together with a BP storage on the A1 close to Sunderland that was charging 202.9p.
Common diesel costs are additionally at a report excessive, hitting 186.6p on Tuesday, up 1.4p from Monday. Greater diesel costs have a major affect on the broader financial system as a result of companies usually use the gas to fill vans and lorries. Earlier than Russia’s invasion in late February, petrol and diesel had been hovering across the 150p mark.
With ministers cautious of a backlash from drivers, Downing Avenue informed petrol retailers they might face investigation by the competitors watchdog if there was proof that the 5p-a-litre reduce in gas responsibility introduced by Rishi Sunak in his March mini-budget was not being handed on.
Inflation has already hit a 40-year-high of 9% and the OECD stated it might proceed rising to peak at above 10% later within the yr.
Regardless of the calls for of some Conservative MPs, Sunak has no rapid plans for tax cuts and intends to attend till the price range within the autumn earlier than developing with one other package deal of assist. The chancellor and the prime minister will define plans within the coming weeks to spice up progress via measures equivalent to bettering abilities and elevating Britain’s funding in analysis and improvement.
The UK financial system will develop by 3.6% in 2022 and there might be zero progress in 2023, in response to the Paris-based OECD, with inflation anticipated to common 8.8% this yr and fall to 7.4% in 2023.
The predictions, contained within the OECD’s half-yearly financial outlook, characterize a pointy downgrade from the estimated 4.7% progress this yr and a couple of.1% subsequent yr made six months in the past.
Laurence Boone, the thinktank’s chief economist, stated the UK was being hit by a mixture of things together with greater rates of interest, greater taxes, decreased commerce and dearer power.
The OECD stated the UK was anticipated to go from being the second fastest-growing financial system within the G7 group of commercial nations after Canada this yr to the slowest-growing in 2023. Japan, Germany, Italy, France and the US are the opposite members of the group.
A UK Treasury spokesperson stated: “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 it’s been in nearly 50 years. But we recognise many people will be concerned by these forecasts.
“While we can’t insulate the UK from global pressures entirely, our economy is in a strong position to deal with these challenges. We have a plan for growth, and we are supporting people with the cost of living.”
The rise in petrol and diesel costs has been blamed on elevated demand for gas world wide, together with in China and the US as Covid restrictions loosen. A squeeze on capability at refineries has additionally stored pump costs excessive, whereas oil has fallen from peaks seen in the beginning of the battle in Ukraine.
The enterprise secretary, Kwasi Kwarteng, wrote to forecourt retailers final month “to remind them of their responsibilities” to go on tax cuts to motorists. He stated it was “unacceptable that different locations even within the same retail chain have widely different prices”.
He has requested the Competitors and Markets Authority to look at the difficulty. The prime minister’s spokesperson stated: “The CMA have said that if they find evidence that the cut is not being passed on, that would mean competition is not working and they could launch a formal investigation. Obviously we would wholeheartedly support them. We are continuing to look at all possible options. Transparency may have an important role to play.”