As Russia shows no sign of backing down in its war on Ukraine, western countries have enforced strict sanctions in a bid to put an end to Vladimir Putin’s attacks. However, the impacts of those sanctions could have knock-on effects worldwide – potentially impacting bills in Britain.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics said on Thursday: “Today’s surge in oil, natural gas and electricity prices, if sustained, points to an extra 1.5pp boost to the UK CPI.
“CPI inflation now likely to peak at circa 8.2 percent in April and only come down to 6.5 percent by the end of the year.
“Hard to see how households’ real spending keeps rising.”
Here are the five ways the UK could be impacted by soaring prices amid the Ukraine / Russia conflict.
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1. Heating bills may increase – again
The price of your energy bills has likely already increased as a result of the energy crisis – however, another increase could be on the cards.
Energy and fuel prices could be impacted by the ongoing conflict in Ukraine, with the cost of oil already soaring to its highest level in seven years.
Forecasts also showed future gas prices increasing by 60 percent in one day.
Analyst at the banking group Investec, Martin Young, told the BBC household energy bills could reach a staggering £3,000 a year.
2. Petrol prices could soar – again
In a similar vein, petrol prices have once more begun to soar – hitting highs of 149.43p a litre and diesel 152.83p a litre.
If Russia cuts off supply to Europe, experts believe prices could increase even further.
Simon Williams, RAC fuel spokesman, said: “If the oil price was to increase to $110 there’s a very real danger the average price of petrol would hit £1.55 a litre.
“This would cause untold financial difficulties for many people who depend on their cars for getting to work and running their lives as it would sky rocket the cost of a full tank to £85.”
Foreign Affairs Committee chair Tom Tugendhat has warned the cost of petrol will soar above £1.70 a litre if action isn’t taken against Russia.
He told the BBC Radio 4’s Today programme: “The decisions made around Europe are absolutely going to shape the way Vladimir Putin sees this because the reality is that if we leave this to stand, if we let this pass, you can forget about petrol at £1.70 a litre, which is where it’s heading now. It will be significantly higher.”
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3. Food prices could soar
Everyday food items made from wheat, corn and sunflower products could rise in price due to the ongoing conflict.
Russia and Ukraine are known as “the breadbasket of Europe” supplying around half of the world’s sunflower products (oil and seeds) and a quarter of the globe’s wheat.
Experts have cautioned Russia’s invasion of Ukraine could see grain prices double.
The UK could be safer, as it produces 90 percent of the wheat it consumes, however farmers could see costs of fertiliser rise – a product mainly exported from Russia.
Mr Tugendhat told BBC Radio 4’s Today programme: “10 per cent of the world’s wheat is grown in Ukraine and the idea that this year’s going to be a good crop, I’m afraid, is for the birds.
“This is absolutely one of those moments where we’re going to see the cost-of-living crisis driven by war.”
4. Buying a car could be costly
Adding to the cost of living misery, the price of buying a car could also increase.
Already the pandemic has caused shortages in supply chain and chips, however as Russia is one of the biggest suppliers of metal using in car production costs could increase.
Russia produces a lot of nickel, a metal used in lithium-ion batteries and palladium, used in catalytic converters.
There are other countries that produce these metals, but prices could grow with the demand if Russia cuts off supplies.
And Russia’s car manufacturing plants could be impacted by sanctions, so cars made by Stellantis, Volkswagen and Toyota may face delays.
5. Mortgage repayments
Inflation has been soaring, and the UK hit 5.5 percent earlier this year showing how much the cost of living has increased.
Should western nations be impacted by the ongoing sanctions/ supply chain issues and soaring costs – inflation could reach close to 10 percent according to the Centre for Economics and Business Research.
As a result, the Bank of England may increase interest rates, something which would affect some homeowners.
Around 2.2 million homeowners in England have mortgages linked to the Bank of England’s base rate – which means repayments would increase.
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