Economists and financial experts have pointed to the UK’s split with the European Union as being one of the major drivers behind inflation in the UK.
Compared to other countries in Europe, Britain has suffered stickier rates of inflation which cannot simply be explained away by the Covid-19 pandemic or war in Ukraine.
UK inflation currently sits at 6.8 per cent, higher than the 2.3 per cent rate in Spain, the 4.3 per cent in France, and the 6.2 per cent in Germany.
Speaking to the i newspaper, economists have said Brexit has caused food inflation to worsen in the UK, and that the low unemployment that is driving inflation upwards has been partly caused by EU workers leaving the UK after Brexit.
This has meant that employees are increasing wages, which means people can pay more for goods, thereby increasing inflation in, it is feared, a wage-price spiral.
Experts speaking to this paper have said that while inflation is a “global phenomenon,” the UK’s exit from the EU has been a factor in our particularly high rate.
Fund manager Stephen Yiu, lead manager of Blue Whale Growth Fund, said: “Unfortunately Brexit arrived at the same time as Covid, and what we saw was a bit of a perfect storm where we had lots of working age people leave the UK, and older working people leave the workforce during the pandemic.
“This has caused a much tighter labour market, and has meant it’s difficult for wage increases to be kept down, which is a major contributor to inflation,” he added.
Dr Edward Jones, senior lecturer in economics at Bangor University, agrees with the premise that Brexit – along with Covid – has resulted in a “tighter” labour market in the UK, meaning there are less people to fill jobs.
“It is interesting to compare the UK experience against the US – which has a tight labour market but wasn’t as impacted by the higher energy prices – and the EU – which has a slacker labour market but has been impacted by the high energy prices. The UK is unique in that it has had to deal with high energy prices and a tight labour market,” he said.
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