RE: FCA to be reformed?20 Mar 2025 14:24
UK government, HMG, intervention during COVID-19 contributed to inflation, but it wasn’t the only cause. The UK government spent over £400 billion on pandemic related support, Furlough scheme, Paid 80% of wages for millions of workers. Business support grants & loans that helped companies survive lockdowns. Eat Out to Help Out which supposedly Stimulated consumer spending in hospitality.
The Bank of England (BoE) cut interest rates to 0.1% and printed £450 billion through QE , buying government bonds. This increased the money supply, making borrowing cheap and fuelling asset prices.
While necessary to prevent economic collapse, it contributed to long-term inflationary pressures. Also, Lockdowns disrupted global supply chains, but Brexit added extra friction e.g., labour shortages in trucking, agriculture, and logistics. Fewer workers plus supply bottlenecks equals higher costs for businesses, which passed on higher prices to consumers.
The we had energy price crisis and External Shocks, Pandemic-related supply chain issues reduced oil and gas production, prices soared. This was worsened by Russia’s invasion of Ukraine ,2022), which sent energy prices skyrocketing.
Some will argue that the government overstimulated the economy, leading to inflation whilst others say without intervention, the economy would have collapsed, and inflation would have come from supply-side factors anyway. Yes, It’s a given that the UK government’s COVID-19 response fiscal stimulus, QE, and low interest rates contributed to inflation; however global supply chain disruptions, energy price shocks, and Brexit also played significant roles.
Perfect storm.
D…
Sign In
Follow the stocks
