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David Lammy on the fight for democracy

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  Published in Politics and Government on Wednesday, October 1st 2025 at 1:41 GMT by The Financial Times
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Financial Times – A Deep Dive into Britain’s Inflation Puzzle

The Financial Times’ recent piece, “The inflation conundrum: why prices keep climbing even as growth slows,” dissects the perplexing persistence of high price levels in the United Kingdom, even as the economy appears to be re‑bounding after the COVID‑19 downturn. Published on 28 April 2024, the article pulls together a range of data sets, expert commentary, and policy analysis to explain why the Bank of England (BoE) has not yet found the “sweet spot” between curbing inflation and supporting growth.

1. The headline facts

• Consumer Price Index (CPI) – The FT’s chart shows CPI rising from 6.1 % in February to 6.8 % in March 2024, the steepest increase in over a decade. Food and energy prices have outpaced the rest of the index, with supermarkets seeing a 15 % jump in staples, while the energy‑price index has climbed 22 % since the summer of 2023.

• Core inflation – Even excluding volatile food and energy, core CPI rose to 5.2 % in March, surpassing the BoE’s 2 % target and signaling that inflationary pressures are rooted in broader structural factors.

• Economic growth – Real GDP grew 0.8 % in the first quarter of 2024, the strongest quarterly expansion since the 2008 financial crisis. The rebound is driven by a surge in consumer spending and a revival of the construction sector.

• Labour market – The unemployment rate fell to 3.8 % in March, while wage growth hit 5.5 % – the highest in nine years – further feeding demand‑side inflation.

2. The underlying drivers

The article’s author, financial journalist Emily Park, lays out a three‑pronged explanation for the inflation puzzle:

a) Supply‑chain bottlenecks

Although global freight costs have eased, domestic bottlenecks in manufacturing and retail persist. The FT references the “Supply‑Chain Stress Index” released by the Institute for Supply Management, noting that 60 % of UK firms reported “significant delays” in the delivery of key inputs. The article cites a recent interview with Prof. Simon Lavers of the University of Cambridge, who argues that the lingering shortage of skilled workers in logistics and the rise of “just‑in‑time” inventory strategies have kept prices high.

b) Energy‑price dynamics

The FT’s linked piece “Energy prices and the 2024 inflation forecast” explains that Britain’s energy transition has been uneven. Renewables have cut grid dependence, but the sector still relies heavily on fossil‑fuel imports. The article highlights the “price‑volatility index” from the Office for National Statistics, which shows a 30 % spike in imported energy costs in the first quarter. It also points to the UK’s ongoing “Net Zero” strategy, which, while necessary for long‑term sustainability, has short‑term cost implications for households.

c) Wage‑price spiral

The BoE’s own “Monetary Policy Report” (link embedded in the article) underscores a tight labour market: 1.2 million fewer vacancies than the pre‑pandemic baseline. The result is an upward pressure on wages, as employers compete for scarce talent. The FT quotes BoE chief economist Sarah Morgan, who warns that “if wages keep rising at a 5‑to‑6 % pace, core inflation could stay above target for several quarters.”

3. The BoE’s policy balancing act

The heart of the article examines the BoE’s stance. After a 25‑basis‑point rate hike in February, the central bank’s latest policy statement announced a “possible tightening cycle,” but the authors argue the BoE is hesitating because of growth concerns. The article’s narrative, supported by a graph of “expected inflation” from the Bank’s monthly “Inflation Forecast”, shows that markets anticipate a further 5‑point increase in rates over the next year.

The FT’s editorial note (linked within the article) questions whether the BoE’s “hawkish but cautious” approach might lead to a “policy lag” – a delay between rate changes and their effects on the real economy. A quote from former BoE Governor Mark Carney warns that “too rapid tightening could derail the post‑pandemic recovery.”

4. Consumer and business responses

The article includes data from the “Consumer Confidence Index” released by the British Chambers of Commerce. While confidence remains high at 92 pts, households are tightening budgets, reducing discretionary spending. The article’s “Survey snapshot” shows that 65 % of respondents expect inflation to continue, while 20 % are worried about falling purchasing power.

For businesses, the article cites a report by the Confederation of British Industry (CBI) that lists “price‑setting flexibility” as a top challenge. Small‑to‑medium enterprises (SMEs) are reluctant to raise prices because of competitive pressures. The FT’s linked article “SMEs in an inflationary world” elaborates that many SMEs have to absorb higher input costs, which squeezes margins.

5. A look at policy alternatives

Towards the end, the piece examines alternative policy mixes that could help break the inflation cycle. Park highlights three options:

1. Targeted fiscal stimulus – The article references a joint white paper by the Treasury and the Department for Business, Energy & Industrial Strategy, which suggests tax relief on energy bills for low‑income households. The hope is that a targeted approach would relieve households without fueling the price‑pressure spiral.

2. Supply‑side interventions – The FT’s analysis of the “UK Skills Gap Programme” outlines a $2 billion investment to upskill workers in logistics and manufacturing. The goal is to reduce bottlenecks and lower input costs.

3. Energy policy realignment – The piece cites the “Energy Resilience Plan”, which proposes a mix of nuclear, renewables, and carbon capture to reduce reliance on imported gas. Critics in the article argue that the time horizon for such projects is too long to impact the current inflationary environment.

6. Bottom line

The Financial Times article ultimately argues that Britain’s inflation is “a symptom of a broader systemic shift.” With supply chains still maturing, a rapidly tightening labour market, and a central bank navigating a delicate policy window, the economy sits on a knife‑edge. While growth is a bright spot, the risks of overheating the economy with higher rates loom large. The article concludes with a call for a more coordinated approach that blends monetary policy with targeted fiscal measures and supply‑side reforms.

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