Britain’s inflation rate is expected to hit a 30-year high on Wednesday, when the government releases its December data, as households across the country face a cost-of-living crisis.
Economists expect inflation to hit 5.2 per cent in the final month of 2021 – the joint highest rate since the early 1990s and a 0.1 per cent increase on the 5.1 per cent recorded in November, which itself was a decade high.
While most pundits see Consumer Price Inflation surging to a peak of 6 per cent by April, Paul Dales, chief UK economist at Capital Economics, expects the figure to edge closer to the 7 per cent mark with a high of 6.9 per cent and ramifications for economic growth and interest rates.
In his mind, the higher than expected inflation surge will lead to slower gross domestic growth and in turn further rate rises than other analysts are anticipating – hitting 1.25 per cent by the end of the year – a significant uplift on the current level of 0.25 per cent.
“The risks are that the labour market remains stronger for longer, CPI inflation stays above the 2 per cent target well into next year and the Bank of England raises interest rates further in 2023,” Mr Dales said.
What will cause UK inflation to soar in April?
While higher energy prices pushed up inflation in the last few months of the year – a reflection of surging global energy costs – in turn causing household bills and transport costs to escalate, the picture in November was slightly different.
November’s inflation rate of 5.1 per cent saw increases in food inflation to 4 per cent from 2.5 per cent and hotels/restaurants inflation to 6.2 per cent from 5.2 per cent. Ruth Gregory, senior UK economist at Capital Economics, said they were offset by a fall in fuel and clothing and footwear inflation.
This left overall CPI inflation at 5.1 per cent, while core inflation, which excludes food, energy, alcohol and tobacco, may have nudged down to 3.9 per cent from 4 per cent.
While Ms Gregory expects inflation “to tread water for a couple of months”, the real trigger point will be higher energy prices from April 1, when Ofgem, the energy regulator, will increase its default energy tariff price cap.
What does this mean for households?
Households are set to be £1,200 a year worse off as a result, with an uplift of about £500 to energy bills that have already risen significantly amid soaring wholesale gas prices in recent months.
“We think a rise in the region of 50 per cent is on the cards. That would add 2.1 percentage points to overall inflation and push it up to 6.9 per cent,” Ms Gregory said.
Failing energy firms could cause a further £100 to be added to energy bills, while a 1.25 per cent rise in National Insurance contributions will cost the average household £600 a year.
In the short-term, household budgets will be increasingly squeezed, as higher utility bills, and taxes hit home, with consumer spending set to dip, at least in the first quarter.
Beyond the first three months of the year, however, Mr Dales expects households to save a smaller share of their incomes as they put more towards everyday living costs.
How is the labour market faring?
While some individuals may look for a higher-paying role to offset their higher living costs, Tuesday’s robust employment figures, which showed unemployment down to 4.1 per cent in the three months to November, highlighted some concerning trends.
Job vacancies may be at an all-time high of 1.247, allowing jobseekers the luxury of being able to shop around for the right role, with pay growth, in nominal terms, well above the 2 to 3 per cent range seen before the pandemic.
But fast-rising inflation is eroding the benefit of higher pay for workers, with pay excluding bonuses flat in inflation-adjusted terms in the three months to November, its weakest performance since July last year.
Ramsey Baghdadi, consumer analyst at analytics company GlobalData, said if wages continue to fall behind the rising cost of living, there will be serious consequences for the foodservice industry.
UK customers are sensitive to changes in price, he said, with a recent survey from GlobalData finding that nearly two in five UK consumers are concerned about their personal finances.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the financial and labour markets have batted away Omicron “like an annoying fly”, but worries are increasing that inflationary pressures combined with an income squeeze “could come with a painful sting”.
“The effect of the great resignation as workers search for higher pay is filtering through to wage growth, but the rises aren’t keeping pace with inflation. It’s a problem already buzzing in the ears of BoE policymakers, as they decide when and how quickly to raise rates to try and keep a lid on price rises,” Ms Streeter said.
Where will interest rates go from here?
James Lynch, fixed income investment manager at Aegon Asset Management, expects the strong labour market to be a factor in the BoE’s next interest rate decision on February 3.
“The labour market is key for the Bank of England’s medium-term outlook on inflation. If the signs are there for wage rises in the future, then inflation is going to be longer lasting than what is currently being driven by spiking energy prices,” he said.
With inflation still to rise further over the next three months and Covid-19 restrictions being eased, Mr Lynch said the tight labour market would encourage the central bank to raise interest rates to 0.5 per cent next month.
Concern about possible labour shortages and pay pressures over the medium term was certainly a major reason for the BoE’s December rate rise, the first since the start of the pandemic.
Financial markets now see an 85 per cent chance that the central bank will raise rates again on February 3, with Mr Dales expecting an increase to 1.25 per cent by December as the bank’s balance sheet shrinks slowly from February and more rapidly from August.
“The rise in inflation will prevent public borrowing from falling as fast in 2022/23 as we previously thought,” he said.
With the BoE’s tougher stance towards inflation, Mr Dales said, in the long term, “interest rates will be higher sooner and inflation will be lower”.
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What is cyberbullying?
Cyberbullying or online bullying could take many forms such as sending unkind or rude messages to someone, socially isolating people from groups, sharing embarrassing pictures of them, or spreading rumors about them.
Cyberbullying can take place on various platforms such as messages, on social media, on group chats, or games.
Parents should watch out for behavioural changes in their children.
When children are being bullied they they may be feel embarrassed and isolated, so parents should watch out for signs of signs of depression and anxiety
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The biog
Mission to Seafarers is one of the largest port-based welfare operators in the world.
It provided services to around 200 ports across 50 countries.
They also provide port chaplains to help them deliver professional welfare services.
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
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Five expert hiking tips
Always check the weather forecast before setting off
Make sure you have plenty of water
Set off early to avoid sudden weather changes in the afternoon
Wear appropriate clothing and footwear
Take your litter home with you
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The specs: 2018 Nissan 370Z Nismo
The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
Torque: 374Nm @ 5,200rpm
Transmission: Seven-speed automatic
Fuel consumption, combined: 10.5L / 100km
Jigra
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
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PREMIER LEAGUE RESULTS
Bournemouth 1 Manchester City 2
Watford 0 Brighton and Hove Albion 0
Newcastle United 3 West Ham United 0
Huddersfield Town 0 Southampton 0
Crystal Palace 0 Swansea City 2
Manchester United 2 Leicester City 0
West Bromwich Albion 1 Stoke City 1
Chelsea 2 Everton 0
Tottenham Hotspur 1 Burnley 1
Liverpool 4 Arsenal 0
Infiniti QX80 specs
Engine: twin-turbocharged 3.5-liter V6
Power: 450hp
Torque: 700Nm
Price: From Dh450,000, Autograph model from Dh510,000
Available: Now
MATCH DETAILS
Chelsea 4
Jorginho (4 pen, 71 pen), Azpilicueta (63), James (74)
Ajax 4
Abraham (2 og), Promes (20). Kepa (35 og), van de Beek (55)
Conflict, drought, famine
Estimates of the number of deaths caused by the famine range from 400,000 to 1 million, according to a document prepared for the UK House of Lords in 2024.
It has been claimed that the policies of the Ethiopian government, which took control after deposing Emperor Haile Selassie in a military-led revolution in 1974, contributed to the scale of the famine.
Dr Miriam Bradley, senior lecturer in humanitarian studies at the University of Manchester, has argued that, by the early 1980s, “several government policies combined to cause, rather than prevent, a famine which lasted from 1983 to 1985. Mengistu’s government imposed Stalinist-model agricultural policies involving forced collectivisation and villagisation [relocation of communities into planned villages].
The West became aware of the catastrophe through a series of BBC News reports by journalist Michael Buerk in October 1984 describing a “biblical famine” and containing graphic images of thousands of people, including children, facing starvation.
Band Aid
Bob Geldof, singer with the Irish rock group The Boomtown Rats, formed Band Aid in response to the horrific images shown in the news broadcasts.
With Midge Ure of the band Ultravox, he wrote the hit charity single Do They Know it’s Christmas in December 1984, featuring a string of high-profile musicians.
Following the single’s success, the idea to stage a rock concert evolved.
Live Aid was a series of simultaneous concerts that took place at Wembley Stadium in London, John F Kennedy Stadium in Philadelphia, the US, and at various other venues across the world.
The combined event was broadcast to an estimated worldwide audience of 1.5 billion.
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
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Groom and Two Brides
Director: Elie Semaan
Starring: Abdullah Boushehri, Laila Abdallah, Lulwa Almulla
Rating: 3/5
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360Vuz PROFILE
Date started: January 2017
Founder: Khaled Zaatarah
Based: Dubai and Los Angeles
Sector: Technology
Size: 21 employees
Funding: $7 million
Investors: Shorooq Partners, KBW Ventures, Vision Ventures, Hala Ventures, 500Startups, Plug and Play, Magnus Olsson, Samih Toukan, Jonathan Labin
if you go
Getting there
Etihad (Etihad.com), Emirates (emirates.com) and Air France (www.airfrance.com) fly to Paris’ Charles de Gaulle Airport, from Abu Dhabi and Dubai respectively. Return flights cost from around Dh3,785. It takes about 40 minutes to get from Paris to Compiègne by train, with return tickets costing €19. The Glade of the Armistice is 6.6km east of the railway station.
Staying there
On a handsome, tree-lined street near the Chateau’s park, La Parenthèse du Rond Royal (laparenthesedurondroyal.com) offers spacious b&b accommodation with thoughtful design touches. Lots of natural woods, old fashioned travelling trunks as decoration and multi-nozzle showers are part of the look, while there are free bikes for those who want to cycle to the glade. Prices start at €120 a night.
More information: musee-armistice-14-18.fr ; compiegne-tourisme.fr; uk.france.fr
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Gertrude Bell's life in focus
A feature film
At one point, two feature films were in the works, but only German director Werner Herzog’s project starring Nicole Kidman would be made. While there were high hopes he would do a worthy job of directing the biopic, when Queen of the Desert arrived in 2015 it was a disappointment. Critics panned the film, in which Herzog largely glossed over Bell’s political work in favour of her ill-fated romances.
A documentary
A project that did do justice to Bell arrived the next year: Sabine Krayenbuhl and Zeva Oelbaum’s Letters from Baghdad: The Extraordinary Life and Times of Gertrude Bell. Drawing on more than 1,000 pieces of archival footage, 1,700 documents and 1,600 letters, the filmmakers painstakingly pieced together a compelling narrative that managed to convey both the depth of Bell’s experience and her tortured love life.
Books, letters and archives
Two biographies have been written about Bell, and both are worth reading: Georgina Howell’s 2006 book Queen of the Desert and Janet Wallach’s 1996 effort Desert Queen. Bell published several books documenting her travels and there are also several volumes of her letters, although they are hard to find in print. Original documents are housed at the Gertrude Bell Archive at the University of Newcastle, which has an online catalogue.
