Weekly Economic Perspectives

UK economic growth is decelerating rapidly this year amid surging inflation, tax increases, and external shocks. The increase in the energy price cap, the reversal of the hospitality VAT cut, rising raw material costs, and upward pressure on energy and commodity prices exacerbated by the Ukraine war have pushed the UK headline inflation to a 30-year high of 7.0% y/y in March. UK inflation is projected to remain elevated for longer, eroding real incomes, consumer spending, and overall growth.