The UK economy is being stalked by stagflation

Regular readers of our commentary will know that we have been predicting worse to come for some months now and the Bank of England have confirmed our view in their latest economic forecast.

On Thursday base rates went up again to their highest level since 2009 and the inflation forecast was revised upwards, predicting in excess of 10% this year, up from their previous forecast of 9%. The forecast for the economy into 2023 also made for depressing reading with fears that we are heading towards stagflation, which we have not seen since the 1970’s.

Can we find any positive in this? Well, not really as we are undoubtedly all looking at a really tough 12/24 months, both in terms of pressure on household & business budgets and the impact of reducing demand for products and services from businesses. The only bit of positive thought we can give is that base rates at 1% are still historically low (2009 was the last time they were 1%) and we are not facing the prospect of double digit base rates that we saw throughout the 1980’s & 90’s.

However, that does not mean things will be easy because we have a generation that are used to rates being below 1% and, both in terms of personal loans & mortgages and financing costs for businesses, these latest increases will hurt for a long time to come.

As we have said before, any business that is struggling as a result of this downturn needs to act decisively and seek independent professional advice and that is why we are always available for an initial zero cost assessment which can be arranged by contacting Alistair Dickson.