1 Gas prices
The cost of natural gas has quadrupled in four months, but energy companies cannot pass on the increase to customers because prices are capped by the government. The price cap will go up by an average of £139 in October, but dozens of smaller suppliers are expected to go out of business. When the cap is reviewed in April next year, it may go up by another £200 or more, some analysts believe. Gas costs are unlikely to fall for months, so heavy industry firms will face higher costs, and the UK is no longer part of the EU’s energy market which allows for simple cross-border trading of energy to keep prices more stable.
2 Universal credit
Ministers plan to cut the £20 Covid boost to the basic £118 a week Universal Credit (UC) payment on 6 October. Income tax, national insurance and the UC taper that means claimants receive only 37p for every £1 earned – as little as £2.24 per hour – meaning that someone working full time on the minimum wage would need to find about an extra day’s work each week to make up the shortfall, according to the Resolution Foundation, pushing 800,000 into poverty.
A potential backbench revolt has forced ministers to look at other options, but plans to tweak the UC taper would mean that £6bn cut would only be reduced to £5bn.
The combination of product shortages, labour shortages and energy price rises will combine to push inflation above 4% for the first time since 2013, according to the Bank of England’s monetary policy committee. In March, the rate stood at 0.7%.
Interest rates remain at an all-time low of 0.1%, but even a small rise could be ruinous for millions of people – the average debt burden per household is £62,705, according to the Money Charity.
A lack of delivery drivers and HGV drivers, as well as other workers in warehouses and food processing plants has led to shortages of products on supermarket shelves and in supplies of diesel and petrol. Retailers’ stock levels are at their lowest since 1983, and levels of imports have plunged, down 17% in August according to the Confederation of British Industry. Business confidence had been rising due to optimism about a post-Covid recovery, but the CBI’s director-general Tony Danker said yesterday the mood had “changed from growing to coping”.
The pandemic furlough scheme ends on 30 September and between 1.3m to 1.7m remain on full or partial furlough, according to ONS figures. Businesses will either make furloughed workers redundant or need to bring them back on to staff.
Demand for workers is at a record high, with 223,000 new job ads posted in the week ending 19 September, according to the Recruitment and Employment Confederation. But even with labour shortages, there is likely to be a mismatch between any newly unemployed people and their skills for available jobs.