That’s certainly Sunak’s hope – allowing him to start developing a campaigning narrative of post-pandemic hope and renewal, with inflation and interest rates falling. His plan to allow a brighter economic outlook to emerge ahead of a late-2024 election makes sense – as far as it goes.
The trouble is, the strategy of finally facing the electorate on the back of an upswing has, to quote Tyson, been “punched in the face” – by geopolitics.
Iranian-backed Houthi militias are attacking ships in the Red Sea, discouraging vessels from using the Suez canal to carry freight from Asia and the Middle East to Europe. The Black Sea, meanwhile, remains a no-go zone, given hostilities between Russia and Ukraine.
In Northern Europe, the Baltic Sea has seen massive gas pipelines blown up and other forms of clandestine underwater sabotage. And growing tensions between China and Taiwan are threatening naval conflict between East and West, the likes of which hasn’t been seen for decades.
As such, the UK economy and the West in general faces major geopolitical dangers – specifically, the impact of conflict on sovereign debt markets and, more immediately, fuel prices.
As a net energy importer, with still very limited gas storage, Britain is particularly vulnerable to any combination of a cold winter, Middle Eastern turmoil and/or another Russia-Ukraine flare-up. That could cause oil and gas prices to spike – sparking renewed inflation, pushing up gilt yields and, in turn, the Government’s debt-service bill, scuppering any pre-election tax cut.
Since mid-December, Red Sea drone attacks mean insurers have forced countless vessels to divert around the vast African continent – increasing average Asia-Europe sailing times from 25 to 35 days, adding mightily to freight fuel bills. Those costs feed into the price of everything, from components, to finished goods and, above all, oil and gas.
The major threat that risks upending Sunak’s hopes of recovery
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That’s certainly Sunak’s hope – allowing him to start developing a campaigning narrative of post-pandemic hope and renewal, with inflation and interest rates falling. His plan to allow a brighter economic outlook to emerge ahead of a late-2024 election makes sense – as far as it goes.
The trouble is, the strategy of finally facing the electorate on the back of an upswing has, to quote Tyson, been “punched in the face” – by geopolitics.
Iranian-backed Houthi militias are attacking ships in the Red Sea, discouraging vessels from using the Suez canal to carry freight from Asia and the Middle East to Europe. The Black Sea, meanwhile, remains a no-go zone, given hostilities between Russia and Ukraine.
In Northern Europe, the Baltic Sea has seen massive gas pipelines blown up and other forms of clandestine underwater sabotage. And growing tensions between China and Taiwan are threatening naval conflict between East and West, the likes of which hasn’t been seen for decades.
As such, the UK economy and the West in general faces major geopolitical dangers – specifically, the impact of conflict on sovereign debt markets and, more immediately, fuel prices.
As a net energy importer, with still very limited gas storage, Britain is particularly vulnerable to any combination of a cold winter, Middle Eastern turmoil and/or another Russia-Ukraine flare-up. That could cause oil and gas prices to spike – sparking renewed inflation, pushing up gilt yields and, in turn, the Government’s debt-service bill, scuppering any pre-election tax cut.
Since mid-December, Red Sea drone attacks mean insurers have forced countless vessels to divert around the vast African continent – increasing average Asia-Europe sailing times from 25 to 35 days, adding mightily to freight fuel bills. Those costs feed into the price of everything, from components, to finished goods and, above all, oil and gas.
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