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Ukraine invasion could send UK inflation even higher, expert warns

Russia’s full-scale invasion of the Ukraine is set to push UK inlfation higher for longer, economists have warned, with a particular impact on fuel and food prices.

Thomas Pugh of RSM UK said this morning’s news has “shocked global financial markets” and sent commodity prices soaring, with oil prices jumping by 7 per cent and natural gas surging by 32%. 

“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,” Mr Pugh said.

READ MORE: Putin warns of ‘consequences never seen’

“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 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. Between them, Russia and Ukraine export a quarter of the world’s wheat, and Ukraine is a major corn exporter.”

This will put further upward pressure on food prices, he said, which were already rising by 4% year-on-year as of December: “All this will exacerbate the cost of living crisis and depress GDP growth.”

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