The spectre of stagflation is haunting Britain once again

As in France, rapidly rising prices and sluggish growth have conspired to create the conditions for increasingly fractious politics here in the UK. Figures from the Office for National Statistics show that the economy expanded by just 0.1 per cent in February compared with 0.8 per cent the previous month. A sharp fall in manufacturing was behind the fall, partially off-set by growth in tourism and travel.

The pace of recovery was always likely to slow once the initial bounce back after the lockdowns began to unwind but economists had expected a better performance after most restrictions were ended. Partly this is the consequence of the war in Ukraine which has pushed up energy prices, exacerbating cost pressures and disrupting supply chains. Staff shortages caused by Covid are also creating difficulties, with travel and trade affected by cancelled flights and ferry crossings.

A sense that were it not for the crisis in Ukraine, the Government would be in serious trouble over its domestic policy is hard to escape. The Chancellor, Rishi Sunak, is facing increasing scrutiny over his financial affairs yet most people care less about those than his stewardship of the economy. They would certainly be more forgiving if their taxes were not rising and the Chancellor had an obvious strategy for firing up growth.

This was always going to be the big challenge for every European government after the damage caused by two years of shut downs, restrictions and eye-watering levels of social spending. Ukraine has made it harder, that is true, but the straws were in the wind before the invasion.

In particular, someone in government needs to get a grip of the staffing and supply chain problems otherwise shortages will continue to pull prices upwards and create the conditions for stagflation.

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