Written by: Robert Diego
Since the beginning of 2021, the UK has seen an increase in living costs. The affordability of household goods and services are being affected as they have been the highest for nearly forty years. Therefore, it is not surprising that August 2022 recorded 9.9% annual rate of inflation. People in the UK are facing a rise in the price of food for sustenance, increased prices of fuel and energy bills, which is perceived to be heightened by the Russia and Ukraine conflict. Household budgets are being affected due to the rising interest rates, household bills and other policies.
Energy prices and consumer goods are increasing inflation rates
The Consumer Prices Index (CPI) which measures consumer process were higher in August 2022 by 9.9% in comparison to August 2021. One element contributing to an increase in inflation is the rise in costs of consumer goods. This is strengthened by the increased consumer demands and supply chain bottlenecks.
The increase of household energy tariffs and the price of petrol has strongly contributed towards inflation. For example, if we look at the domestic price of gas and domestic price of electricity, between August 2021 and August 2022, they have increase by 96% and 54% respectively. After Russia invaded the Ukraine, there was a record high increase in the price of petrol. This continued to increase during 2022 predominantly due to a decrease in the supply of gas from Russia. The prices of electricity have followed a similar trend due to the direct association between gas and electricity.
Is Russia and Ukraine creating an impact on the UK?
The impact of Russia’s invasion of the Ukraine has created a political, humanitarian, and military impact around the world, affecting global economies. The UK has primarily been affected by the increased energy prices. Post invasion, international markets have been subjected to a gradual deterioration in gas and oil prices. Hence, within the UK there has been an increase in the price of road fuel and energy bills. It is also expected that international businesses will face increased energy bill prices and increased prices in materials and food. Particularly as Russia and Ukraine export and generate agricultural produce including wheat and metals, therefore international markets are also experiencing a price increase, having a domino effect on the UK.
