ECONOMISTS are warning that Britain could be on the brink of the longest recession in 30 years following the Bank of England’s interest-rate rise of 0.5% and ‘gloomy’ predictions of inflation soaring to 13% by October.
The Island will feel its impact too in the coming months through higher credit-card bills, increased prices in the shops and a squeeze on wages, according to Ben Shenton, a senior investment director at Westminster Asset Management and vice-chairman of Age Concern Jersey.
The former Senator said: ‘There tends to be a bit of a time lag, but it will definitely have an effect in Jersey in a number of ways. I think the Bank of England has taken a rather gloomy view, but it will push up borrowing costs so large projects such as the hospital will cost significantly more than expected.’
However, it will hit people living on low incomes the most, he added: ‘It will lower the number of goods in their baskets. People who could afford to eat out or take holidays will have to be more cautious. There will be a knock-on effect in the retail environment, which will lead to demands for higher wages, squeezing businesses and forcing some to close down.’
But Mr Shenton said it was important to remember the economic climate could change again very quickly if the war in Ukraine ended or if there was a large reduction in the price of oil, for example. ‘The key with any forecast is that it’s not set in stone,’ he said.
A joint statement released by Treasury Minister Ian Gorst and Social Security Minister Elaine Millar said: ‘It is important to recognise that Jersey’s economy is in a strong position and at full capacity with record low unemployment and in good shape to face the current challenges. Nevertheless ministers are keeping the situation under review and will respond with further measures as required.’
They added: ‘Government has put together a considerable initial response in anticipation of inflation and interest rates rising above current levels. That has focused on the immediate six months and the lowest-income members of our community, but also reflects the increased costs for families across the Island. However, in this fast-changing environment, ministers are keeping the situation under review.’