February 4, 2023

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Stagflation and Recession Warnings Plague U.K. Businesses

2 min read

In the struggle against soaring prices, Sean Hughes has been willing to try anything to keep costs down at his gastropub, Dylans at The Kings Arms. That includes adding some less traditional fare among favorites like prime rib and Scotch eggs. The latest: confit beef tongue.

His diners, in St. Albans, a relatively wealthy commuter city north of London, got over their initial hesitancy, he insists, and the tongue, a less expensive cut of beef, became a popular choice. But this is how his menus are determined now — by cost.

Meat prices, Mr. Hughes said, are up by a third. A 20-liter container of rapeseed oil has increased to 38 British pounds (about $48) from £14. Breweries are raising beer prices. Wage costs have increased 20 percent as he strives to keep hold of staff in a competitive market. At the same time, he’s trying to keep prices on the menu steady.

“It’s a very, very, very delicate balancing act at the moment,” Mr. Hughes said. “It’s definitely not some kind of boom recovery that we were all hoping for.”

Instead Britain is staring down the specter of stagflation, a ruinous mix of stagnant economic growth and rapid inflation. A Conservative lawmaker first used the word in Parliament in 1965, and it was a chilling warning of what was to come over the next two decades: Unemployment rose and inflation climbed into double digits amid workers’ strikes and political instability. Ever since, the grim economy of the 1970s and the prospects of stagflation’s returning have haunted Britain’s political leaders.

While there aren’t strong unions pushing up wages across the country or rising ranks of unemployed people as there were in the 1970s, there are just enough flickers of stagflation to cause alarm.

Britain is experiencing the fastest pace in consumer price growth in four decades, with a 9 percent inflation rate. Economic growth ground to a halt in February and then contracted slightly in March. The situation is expected to worsen: Inflation…

Eshe Nelson

2022-06-08 00:30:12

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