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The Perfect Storm: The Energy Crisis, Pandemic and Brexit’s Impact on British Homes | inflation

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The Bank of England (BoE) warned this week that soaring energy rates will push inflation up to 4% this winter, putting pressure on already tight household budgets. The economic aftermath of the pandemic and Brexit is driving up the cost of necessities like food, clothing, travel and even home repairs. We take a look at how this perfect storm can affect you.

Supermarket shopping. A rare fruit served in a Tesco store in Swansea, South Wales. Photo: Robert Mellen/REX/Shutterstock

Rising prices for a wide range of commodities from wheat to sugar, coffee and palm oil, coupled with a shortage of truck drivers and food processing workers, as well as rising supply costs, including packaging, will drive up supermarket prices this fall and winter. There is a suggestion that food prices could rise by at least 5%.

Meat processors have warned that costs will rise if there are already difficulties in hiring workers in the summer. These challenges have been added by the sharp rise in the cost of CO2 gas used for slaughtering pigs and poultry, as well as packaging meat and dairy products.

But the problem isn’t just local. Supply chain crises and difficult weather conditions are driving up food prices worldwide as demand increases after closures. Experts say coffee prices have hit a world high in seven years, which will take a toll on consumers. Pasta is also expected to rise due to a shortage of durum wheat due to drought and heatwaves on farms in Canada, one of the largest producers. One analyst predicted that the price of a 500g bag of spaghetti could rise by 60p (50%) to reach 1.80 won.

Clive Black, an analyst at Shore Capital, said there’s not necessarily a straight line from supermarket shelves to higher commodity prices, as competitive pressures and levels of demand act as a deterrent to inflation. For example, packaged bread is unlikely to rise while wheat rises, as demand decreases and suppliers compete fiercely for business.

Sales signs for clothing and other household items adorn the shop windows. Retailer discounts are expected to decrease this fall and spring. Photo: Rob Wilkinson/Alamy

Whether you want to refill your closet or liven up your living room, you have fewer options and higher prices.

Retailers from Dunelm to Halfords have recently warned of difficulties importing their products, pointing to inflation from high prices for materials and shipping. Last year it cost $8,000 (5,840) to get a shipping container from East Asia to the UK, but now it’s over $20,000 in some cases, plus metal, wood and cotton costs.

In the case of clothing, it is highly likely that you have bought fabrics such as cotton well in advance, so the price increase may not come until spring. The dollar exchange rate, where most clothing is traded internationally, is also relatively favorable.

Shore Capital’s Clive Black said that because retailers have been cautious about buying supplies, discounts on apparel and potentially many other merchandise will be much lower this fall and winter in downtown areas, which will have a major impact on pricing. Black Friday is expected to be very unusual. I suspect there will be very few big discounts and discounts on clobbers we’ve seen in recent years.

Out-of-the-way restaurant prices will go up. Photo: Anna Ivanova/Alamy

Staff shortages and rising food and beverage costs are likely to lead to bigger taps in pubs and restaurants ahead of Christmas.

According to a recent survey conducted by industry analyst CGA and Service Business 4, three-quarters of hospitality companies said they were likely to raise prices for their customers. It’s no surprise that the price of sparkling wine in supermarkets rose 6% this month, according to the latest data from Kantar’s analysts. Chips are up more than 5% and fruit juices are up 4%.

The rising cost of cleaning products and other consumables is putting increasing pressure on service workers to raise wages amid fierce competition for workers. As many EU workers, who have traditionally supported the industry, return home after Brexit, demand for highly skilled positions like chefs is high. Coffee shops, which used to receive the minimum wage, now have to raise their wages. Pret and Costa recently announced they would raise their salaries by about 5%.

TransportPetrol prices are at their highest since 2013. Photo: Geoffrey Swaine/REX/Shutterstock

Many families saved on transportation during the lockdown, but as restrictions eased, costs skyrocketed again. Gasoline prices are at their highest in eight years and rail commuters in England and Wales must get used to paying more after rates rise by 2.6% in the spring.

The fuel shortage is causing more pain for drivers who have to dig deeper when refueling. According to AA, gasoline is 135.9pa liters, a level not seen since 2013. That’s 15p more than before the pandemic, adding up to 16.50 pesos of fuel per month based on the driver filling the tank twice.

One of the biggest increases is the cost of gasoline as UK households are under great pressure from price hikes, said AAs Luke Bosdet. Families can turn to alternatives for shopping, but fuel cannot.

Household gas prices are rising rapidly. Photo: Graham Coney/Alamy

More than 1.5 million households were affected by the energy crisis, affecting seven small energy suppliers. Their customers typically paid between $800-900 per year, but now have to pay an additional $400 or more. This is because switching to a new supplier will move you towards the price cap set by Ofgem of 1,277 per household from the beginning of next month.

However, high energy costs are not the only problem. Households have to look for cash to cover high parliamentary taxes, water, broadband and cell phone bills. According to comparison site Money.co.uk, the council tax on the average home is 1,881, up 4% this year, and the water bill is up 3% to 408.

Home Improvements Some builders are reporting building material shortages. Photo: Maureen McLean/REX/Shutterstock

Over the past year, Britons have been pouring money into home repairs, but the cost of loft conversions and extensions are rising as builders grapple with sharp rises in material costs and high wage bills.

Plywood has increased by more than 80% over the past year, and wood has increased by 64%, according to Noble Francis, Economics Director of the Construction Products Association. There is also an expectation that daily necessities such as cement and bricks will also rise.

We’ve seen a significant rise in labor costs in recent years, not just because of the material aspect, which has been a major driver of inflation since last fall.

For the three months through the end of July, official data showed that construction wages were 11% higher than in 2020, and workers took 636 people home per week. This is particularly relevant in the home improvement market, where wage bills account for about two-thirds of project costs.

Sources

1/ https://Google.com/

2/ https://www.theguardian.com/business/2021/sep/24/how-will-energy-crisis-pandemic-brexit-affect-uk-households

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