4th January 2022
Bite-sized business news from the UK and beyond
Good morning Aaand we’re back! Welcome to 2022, hope you all had a relaxing break. For anyone looking for achievable resolutions then check out this list of 100 ways to slightly improve your life without really trying.
- 2022’s key economic trends
- Cost of living set to rise by £1,200
2022’s key economic trends
What’s going on?
This year the UK economy is set to be marked by: Covid, inflation and interest rate rises.
Why is this important?
Unfortunately it doesn't appear that Coronavirus is going anywhere soon, but hopefully this year it becomes something that Brits can live alongside.
The end of 2021 saw the emergence of the Omicron variant which led to the reinstatement of some restrictions in countries like the UK and full scale lockdown elsewhere like the Netherlands.
On the bright side production of vaccines and treatments will ramp up in 2022 and their widespread availability should dramatically reduce hospitalisations and deaths.
But on the downside it’s predicted that more variants could rear their heads with the possibility of super-variant i.e. one that’s highly contagious and proves resistant to vaccines.
Inflation was one of the biggest stories of 2021 with consumer prices reaching a decade high of 5.1% in November. Pricing pressure came from kinks in global supply chains, labour shortages and rising energy demand post lockdown.
These issues are expected to continue for the next few months, peaking in the spring before easing, with inflation set to hit 6% - the highest since 1992.
Interest rate rises
Just before Christmas the Bank of England took the market by surprise when it announced the first increase in interest rates for three years from 0.1% to 0.25%.
It was all in the name of curbing inflation but was seen as a possibly risky move given Omicron-related economic uncertainty.
Investors predict that the Bank will increase interest rates to 1% by the end of the year to keep a lid on inflation, with the first of several small moves from as soon as next month.
It may be a new year but a lot of the same trends from 2021 have been carried forward. There’s hope that 2022 will bring us closer to the end of the pandemic and to a new normal of living alongside Covid. But the knock-on effects of higher inflation and interest rates could linger for longer.
Cost of living set to rise by £1,200
2022 will be the “year of the squeeze” for household income, that’s according to the economic thinktank the Resolution Foundation.
It’s estimated that the average family will be £1,200 worse off due to a combination of higher inflation, low wage growth and tax rises.
The pain is already being felt with consumer prices at a decade high, but April will be the peak when the energy price cap is set to rise to a record high and national insurance contributions will increase.
The Foundation said that wages didn’t grow towards the end of 2021 and is unlikely to start growing again until the final quarter of this year.
Poorer households will feel the squeeze the most as they spend a higher proportion of their income on energy bills. They also had less opportunity to save during the pandemic and now have a smaller buffer.
The cost of living crisis will likely be a hot economic and political topic this year. The Foundation has called on the government to do more to help households by raising universal credit and holding down energy bills.
Stat of the day
The world economy is forecast to reach £100 trillion for the first time in 2022
Other stories to keep you in the loop
- Staff shortages could force business closures in the New Year
- UK bank branch numbers have almost halved since 2015
- House prices in UK soared to record high in 2021, says Nationwide
- Ban on loyalty penalty for car and home insurance customers comes into effect
- China's Tencent builds stake in UK digital bank Monzo
- Just Eat joins UK on-demand grocery delivery market with Asda tie-up
- David Bowie back catalogue sells for 'hundreds of millions of dollars'
- Apple hands out £130k bonuses as it fends off Meta engineer grab
- Former Silicon Valley darling founder convicted of fraud
- Tesla shares surge as it delivers record electric car sales sales
- China Evergrande shares suspended amid reports of demolition order
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