The full scale invasion of Ukraine by Russia is likely to see food prices rise as the country is known as the “breadbasket” of Europe as they produce so much wheat, corn, barley and bread.
Economists have warned on Thursday that the cost of living in the UK could be exacerbated with inflation rising well beyond current predictions amid the invasion.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics warned that if price rises continue for electricity, oil and gas then this will push inflation to 8.2% by April and by then end of 2022 it could fall back to 6.5%.
Tombs said, “Today’s surge in oil, natural gas and electricity prices, if sustained, points to an extra 1.5pp boost to the UK CPI.
“CPI inflation now likely to peak at circa 8.2% in April and only come down to 6.5% by the end of the year.
“Hard to see how households’ real spending keeps rising.”
The Bank of England believes that inflation will peak by more than 7% in April when the domestic energy bills will rise by 50% as the new price cap start which could now rise by more than £3,000 a year.
Thomas Pugh, an economist at RSM UK added, “Looking beyond the immediate humanitarian impact, the effect on the UK economy will depend on what happens next and how long commodity prices remain elevated for.
“But inflation in the UK will now probably rise beyond the 7.5% peak we had expected in April and will remain higher for longer.”
“A good general guideline is that a 10 dollar increase in a barrel of oil increases inflation over the next year by about 0.15 percentage points.
“The direct effects on inflation will also likely extend to food prices.”
Conservative former minister Robert Halfon told MPs in the House of Commons, “Oil prices following the Russian invasion have gone up to over 100 dollars a barrel.
“Energy prices are rocketing.
“This is going to impact millions of people across the country and make petrol and energy even more unaffordable.”
Commons Leader Mark Spencer replied, “Clearly, the conflict in Ukraine between Russia and Ukraine is going to have an impact not only on global fuel prices, but also on global food prices as well.
Chris Rogers, a supply chain economist at Flexport, said, “The physical availability of the commodities that are produced and exported from Ukraine and Russia may be interrupted by conflict.”
“The Ukraine is an enormous supplier of food, of wheat and of bread.
“I think it’s something that the UK Government will monitor and, of course, will assist through its work to try and lessen the burden of the cost of living.”