Why does the UK have the highest inflation in the G7?

“People buy lunch at McDonald’s and then take up space. They brush their teeth and wash their faces at the sink, then use free wifi to watch TV all day,” said Matthew Cole, director of the Fuel Bank Foundation about abuse. How development in the UK is affecting people.

According to The Guardian, inflation in the foggy country has reached the highest level since the early 1980s until now. After a record increase in heating gas and electricity prices in April 2022, inflation in the UK has reached the highest level in the group of 7 countries with the most developed economies in the world (G7).

With an inflation rate of 9% in April, the UK surpassed both the 8.3% of the US and 7.4% of Germany. Meanwhile, Japan, due to its aging population, has remained low for many years, at the bottom of the rankings with 1.2%.

So why is the situation in the UK so bad?

Why does the UK have the highest inflation in the G7?  - Photo 1.

Energy and Taxes

The British economy has a fatal weakness that is highly dependent on energy imports, thereby being strongly affected when the price of petrol and gas fluctuates. The post-pandemic reopening has caused gasoline demand to explode, pushing up prices in the UK. Then the Ukraine conflict took place, making the situation worse.

In addition, The Guardien newspaper said that other governments in Europe had energy defense policies, while the UK lacked contingency measures.

In France, for example, the government owns the state-owned electricity company EDF, thereby imposing a ceiling price increase of 4%. In addition, the country also has nuclear power to ensure energy security.

Italy taxes energy companies and uses its budget of 8 billion euros (£6.8 billion) from here to support bills for people. Spain and Portugal imposed a ceiling on petrol and gas prices. Germany reduced the price of gasoline by 30% while the UK only reduced the price of gasoline by 5pence.

Ireland offers a 20% discount on public transport fares, while Spain and Qui offer reduced VAT on energy bills. The British government has also pledged to do this if Brexit is completed, but nothing has happened.

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Although the UK has announced a support of £ 22 billion this fiscal year to help people pay bills, reduce taxes … but they do not bring down inflation is at a high level. The main reason is that in order to have more budget support, the British government has to raise taxes, thereby becoming the only country in the G7 group to do this amid the inflation crisis.

Recently, British Finance Minister Rishi Sunak has adjusted the regulations on the amount of workers’ insurance premiums to help low-income people benefit more. In return, the high and middle income groups have to bear additional costs.

Research by the UK’s Office for Budget Responsibility (OBR) shows that after the new rule is introduced, Britons’ disposable income will fall by another 2%, the steepest decline in 65 years.


The UK is an open economy with total trade accounting for 60% of GDP. However, because the UK manufacturing industry is much smaller than in countries like Germany or Italy, they are quite dependent on the supply chain.

Therefore, when the pandemic caused China to close to fight the epidemic, the cost of transportation and logistics increased, causing the prices of production, consumption and services in the UK to increase.

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In addition, the UK’s departure from the European Union (EU), also known as Brexit, also makes the waiting time for paperwork and customs clearance longer, thereby pushing up prices.

The Guardian reports that nearly half of the food in the UK is domestically produced and most of the country has to import agricultural products, including key foods such as cereals, milk, eggs …

According to many experts, Brexit has caused food prices in the UK to increase by 6% between December 2019 and September 2021 due to tariff barriers.

In addition, the pound has depreciated in recent months, to its lowest level against the dollar since the outbreak of the pandemic, which has made imports more expensive than ever, including essentials such as energy, wages and salaries. real.

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Lack of labor

Due to Brexit, more and more foreign workers are leaving the UK, while the elderly here also have to quit their jobs because of the pandemic, young people lack experience, knowledge, qualifications or simply refuse to work. difficult jobs. As a result, many British businesses lacked workers, forced to raise wages, causing labor costs to increase, leading to higher prices.

The UK unemployment rate has fallen to its lowest level since the mid-1970s. For the first time in history, there are fewer unemployed people in the UK than there are vacancies. The average annual salary increase in the UK without bonuses has reached 4.2%, the highest in the past 10 years.

However, this increase in wages has not kept pace with the increase in inflation.

*Source: CNBC

Huyen Bang

Following Economic Life

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