The war in Ukraine is likely to drive up food prices in the UK and elsewhere. Bank of England boss Bailey now warns of "apocalyptic" price increases. This could result in millions of people slipping into poverty and debt.
In view of the Russian war against the important agricultural country Ukraine, the British central bank head Andrew Bailey has warned of "apocalyptic" price increases for food. Ukraine has sufficient stocks but cannot export the goods, Bailey told a parliamentary committee. "It is a major concern for this country and a major concern for developing countries," the Bank of England governor said. "Sorry to be apocalyptic, but that's a big problem."
Bailey's sensational statements are likely to add to the concerns of millions of people in the UK about how to make ends meet in the face of rampant inflation and soaring cost of living. Especially since Bailey in no way contributed to reassurance - rather he showed himself helpless in front of MPs in view of the effects of the Russian war against the agricultural country Ukraine. "We can't predict things like wars, it's in no one's power," Bailey said.
Most recently, food prices in Great Britain had already climbed by 5.9 percent, and experts expect a further increase. This also affects the catering industry - and endangers a national dish: Many fish and chip shops could soon be on the brink of collapse due to the consequences of the war against Ukraine, said Andrew Crook, head of the National Federation of Fish Friers (NFFF). Because the four ingredients - flour, sunflower oil, fish and potatoes - are particularly badly affected. So far, the "Chippies", as the popular shops are called, have obtained half of their sunflower oil from Russia or the Ukraine. Flour for the breading has also been imported to a large extent from the Ukraine. The prices for both have risen sharply since the beginning of the war.
Now snack bar owners fear further losses because of the sanctions against Russia. About 40 percent of the fish are caught by Russian trawlers. Punitive tariffs will soon cause prices to skyrocket here as well. And because Russian fertilizers are becoming more expensive, potatoes are also likely to cost more soon. The rising prices are added to the significant increase in energy costs.
Association leader Crook demands that the government must lower the VAT rate for the catering trade again - as it had already done temporarily because of the pandemic. Currently, 20 percent VAT is due again on prepared food in Great Britain. "Without change, many good employers will struggle to survive," Crook said.
It could also be a struggle for survival for many people who already have little money for fish and chips. Because BoE boss Bailey not only expects further price increases for food, which in turn will contribute to the inexorably climbing inflation. The central bank is likely to announce a significant increase again this Wednesday, so far in the fourth quarter it is expecting up to 10.25 percent. Bailey also fears a "very large real wage shock". According to calculations by the TUC union, between March 2021 and 2022 real wages had already fallen by 68 pounds (81 euros) per month. As a result, according to Bailey, domestic demand will fall - and ultimately unemployment will rise again.
Government politicians were irritated by Bailey's warnings. Finance Minister Rishi Sunak hailed the lowest unemployment rate in almost 50 years. For the first time ever, there are more jobs available than there are job seekers. But experts warn. Economic inactivity and labor shortages would have a lasting impact on growth, said Suren Thiru from the BCC Chamber of Commerce Association.
In fact, current studies bode ill: Rising prices could push millions of people into poverty and debt. Many would have to consider whether to spend their money on food or heating. The regulator's Office for Budget Responsibility predicted living standards would fall at the fastest rate since the mid-1950s.
The government has not yet had a real answer. Experts consider measures designed to relieve poor households to be insufficient. An emergency budget, such as that demanded by BCC economist Thiru, has not yet been planned. Rather, conservative MPs caused outrage: MP Lee Anderson suggested that people who get their food from food banks just couldn't cook. And his colleague Rachel Maclean suggested that those affected should work more or switch to better-paying jobs.