Is inflation a threat to the UK recovery?
This week sees a number of vital economic statistics in the UK with concerns that the rate of inflation is set to spike upwards in the early part of 2010. Recent figures have shown an increase in the cost of raw materials, much of which came from the upward movement in the price of oil, which will have an impact upon inflation. So what else do we need to monitor in the short term?
There is also concern that the government's refusal to maintain VAT at 15%, and instead return it to 17.5%, will also place further upward pressure on the cost of living in the UK. In what is becoming a more difficult scenario by the day, the Bank of England is also under pressure because of the strategy regarding UK base rates which have remained at 0.5% for some time. If inflation does begin to take off, and the Bank of England does not respond quickly enough, we could move towards a situation where the rate of inflation spirals out of control and we need to see a significant increase in base rates in a very short space of time.
The ability to increase base rates and make borrowing more expensive is a very basic tool in the economic UK government's toolbox but one which has proven very effective over the years.
Budget Headlines : UK Economy to fall by 3.5% during 2009
UK Economy to fall by 3.5% during 2009...Read More
Mervyn King warns UK banks of threat of nationalisation
The Gov of the Bank of England has today joined calls for UK banks to release more liquidity to the consumer market and the business sector. Mervyn King has also suggested that if banks are unwilling to abide by the formal terms of their rescue by the taxpayer the government may look at nationalisation to refloat the economy.
While many may ignore these threats from the Bank of Engl...
Head of Royal Mail calls on unions to "shut up"
Adam Crozier, the head of Royal Mail, has this evening set the scene for some very difficult negotiations later this week after telling the unions to "shut up". In what many believe are the last ditch talks before more strike announcement prior to Christmas, this is a high-risk strategy by the head of Royal Mail and one which could backfire spectacularly!
It would seem that Adam Cro...
U.K. economy hit by the big freeze
Despite the fact that other countries around the world live in subzero temperatures for many months of the year it seems yet again that the UK is nowhere near equipped to cope with the ongoing cold snap. We have news from postal services that post and parcels will be late because of the weather, local councils are running short of grit and in many places have stopped gritting roads and thousands o...Read More
Chinese economic slowdown threat to worldwide revival
Despite the fact that the Chinese economy has shown signs of revival over the last few weeks there is growing concern that an economic slowdown could just around the corner and could potentially unravel the worldwide recovery currently underway. The World Economic Forum believes that there is a 20% chance of a serious economic slowdown in China in the short to medium term which could lead to econo...Read More