LONDON (BBC): Russia’s invasion of Ukraine means significant uncertainty for the UK economy, the chancellor has warned.
This is despite UK growth bouncing back in January as the effects of the Omicron Covid variant began to ease.
The economy grew by 0.8% compared with a 0.2% contraction in December the Office for National Statistics said.
But one industry body warned the UK faced a higher risk of recession as the impact of the Ukraine conflict would add to the sharp rise in living costs.
UK households were already facing sharply rising costs before Russia’s invasion of Ukraine, in part due to soaring energy costs.
The conflict in Ukraine pushed the price of oil to its highest level for nearly 14 years at one point and this has had a knock-on impact on fuel costs, with UK petrol prices hitting record highs. Gas prices have also soared, leading to warnings that average energy bills could reach £3,000 per year in October, after rising to £2,000 in April when the energy price cap is raised.
Grain prices have also jumped as both Russia and Ukraine are major global producers, particularly of wheat. “Russia’s invasion of Ukraine has increased the risk of a recession in the UK by exacerbating the already acute inflationary squeeze on consumers and businesses and derailing the supply of critical commodities to many sectors of the economy,” said Suren Thiru, the British Chambers of Commerce (BCC) said.
Mr Thiru said January’s growth was now like looking into a rear-view mirror.
The ONS figures show the UK’s economy rebounded in January, with wholesaling, retailing, restaurants and takeaways all performing well.
While supply chain issues continued to dog some sectors, construction and manufacturing both grew, the ONS said.
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