What has been the long-term impacts of Covid-19 on the UK economy in terms of people’s purchasing power?
The UK economy is not well defined due to Covid-19 and London’s withdrawal from the EU. Although all European countries are in an economic crisis caused by the Covid-19 pandemic, statistics and polls show that the UK is in the worst position in all aspects compared to all OECD countries. The long-term impacts of Covid-19 on its economy are undeniable and will show over time. The steady rise in prices and the decline in the purchasing power of the British are among the consequences of the outbreak of Covid-19 on the economy.
Rising Prices and British Frustration
The long-term impacts of Covid-19 on the UK economy have persuaded Bank of England policymakers to change their forecasts. Bank of England policymaker, Michael Saunders, has advised people and families to prepare for a sharp rise in interest rates in the current economic situation. Saunders said markets had a right to consider rising inflation in their commodity prices sooner than previously expected, given rising interest rates. Saunders added that he was concerned that capacity pressures and rising salaries would increase inflation in the UK even more, but that inflation could remain stable as long as monetary policy did not take effect.
Forecasts of Worrying Inflation in the UK
Saunders believes that it would be appropriate for markets to correct their past prices sooner. Saunders, meanwhile, was one of two policymakers who voted last month to halt the Bank of England (BoE) bond-buying programme. He has emerged as one of BoE’s most courageous officials in recent months, and his remarks have encouraged investors who have bet on an imminent rise in prices, although he has said he is not announcing the bank’s precise intentions. Saunders said he was not in favour of using cryptic words or expressing his intentions before the meeting. Decisions are made at the right time. His remarks came shortly after Bank of England Governor, Andrew Bailey, said inflation above the 2% target was worrying. Bailey warned that inflation was likely to exceed even the central bank’s latest forecast and needed to be managed to prevent it from surviving.
Failed Attempt to Stop Rising Prices
“Inflation is clearly something that bites on people’s household income. I’m sure they’re already feeling that in terms of prices that are going up,” Bailey said. He also said he did not anticipate further increases in unemployment in the country. The BoE announced last month that inflation is likely to exceed 4% in the last three months of this year, indicating that the Bank of England may be the first major central bank in Europe to raise rates since the outbreak of the Covid-19 pandemic. Investors in recent weeks have raised their bets on the rapid growth of inflation announced by the BoE, but markets in the first move, by the end of this year, have been almost fully priced, bringing the inflation rate from the current 0.1% to 0.75% in 2022.
Supply Chain Problems Will Continue Until Next Year
According to a survey, the chief financial officers of top British companies believe that supply chain problems in the UK will continue to affect the recovery of the economy from the Covid-19 crisis and will last for at least another year.
Forecasts of Rising Inflation
With the Bank of England trying to estimate how long the recent rise in inflation will continue, more than half of the top financial executives in the survey believe that inflation will rise above 2.5% in two years. The Bank of England forecast a two-year inflation rate slightly above 2% in August; the bank forecasts a 4% inflation rate for the coming months.
Inflation of 5% Awaits the UK
The Bank of England had forecast an inflation rate of 2% for this year; but for four months now, inflation has been exceeding the central bank’s estimate. Huw Pill, chief economist of the Bank of England, predicts that inflation will reach 5% next year. Economists believe that the sharp rise in inflation is another long-term impact of Covid-19 on the UK economy, among other factors.
Continued Decline in Car Sales in the UK
The long-term impacts of Covid-19 on the UK economy have also affected car sales. Sales have been declining since the outbreak of Covid-19 in the UK due to social restrictions, and the closure of car showrooms and dealerships in the country. Society of Motor Manufacturers and Traders (SMMT) released statistics showing that new car sales in October were at their lowest level since 1991. According to statistics released on Thursday, 106,265 new licence plates were registered in October and 1.66 million new cars were expected to be sold by the end of this year, an increase of only 1.9% over last year.
Reduced Global Car Production
This is attributed to the shortage of some spare parts, which has led to a decline in the global production of new cars. Mike Hawes, SMMT chief executive, also noted how the current performance reflects the challenging supply constraints, with the industry battling against semiconductor shortages and increasingly strong economic headwinds as inflation rises, taxes increase and consumer confidence weakens.
The Key Role of Universities in Economic Improvement
Many believe that the long-term impacts of Covid-19 on the UK economy can be mitigated by using universities. After the irreparable economic damages caused by the Covid-19 pandemic, the British came to the conclusion that universities should play a pivotal role in improving the country’s economy. Universities UK, the collective voice of 140 higher education institutions in the country, recently announced that £95 billion had helped the UK economy and supported more than 815,000 jobs. The institute has told the British government that it must maintain a stable budget for universities and provide the necessary support to disadvantaged students.
Leading Universities in the Fight Against Covid-19
“Universities have been celebrated for being front and centre in the fight against coronavirus, but it is also important to recognise the livelihoods they support through creating and supporting jobs and businesses across the country,” said Steve West, president of Universities UK and Vice-Chancellor of UWE Bristol. He added: “The economic and cultural contribution of our universities is vast and benefits communities across all parts of the UK. Universities can be central to speeding up the UK’s recovery from the pandemic.” About 191,000 nurses, 84,000 medical specialists and 188,000 teachers will be able to study at UK universities over the next five years, according to the president of Universities UK. “Now is the time for government to capitalise on the strength of our world-class universities, working with us to ensure universities have the right funding environment to drive economic growth, create new jobs and improve opportunities for people of all ages and backgrounds,” he said.
Covid-19 Severely Damaged the UK Economy
The Office for National Statistics reports that the UK economy experienced the largest annual loss in the last three centuries with a 9.9% decline last year due to the limitations of the Covid-19 pandemic. The Consumer Price Index (CPI) rose to 3.2% in August, up 1.2% from the previous month, and is the biggest increase since 2012, according to the ONS.
Since leaving the EU, the UK economy has suffered more from supply and labour shortages than any other economy in the world. In addition to these factors, the long-term impacts of Covid-19 on the UK economy are evolving over time. The sharp rise in prices comes at a time when the British have lost much of their purchasing power due to unemployment and successive quarantines. Experts predict that the trend of rising prices will continue at least until next year. Boris Johnson’s government has so far sought various ways to improve the UK economy. But in practice, the purchasing power of the British has decreased day by day while the prices of goods and commodities they need have increased.