State of the Nation
Scotland heading towards cost of living crisis
Inflation is now a key concern
Scotland is heading fast towards a cost of living crisis, according to the latest State of the Nation briefing compiled by SCDI.
UK inflation leapt to 3.2% in August – up from 2% in July, the biggest ever increase in a single month – as the cost of food, fuel, recreation and furniture all rose sharply.
According to the OECD, inflation is currently on the rise around the world due to higher raw materials costs, constraints on the supply of goods and stronger consumer demand as economies reopen and prices bounce back from COVID-19.
However, while the OECD expects inflation to decline in every other G20 economy, with substantial falls in the US, France, and Germany, it forecasts that a post-Brexit Britain will face inflation still around 3% at the close of 2022.
Petrol prices have increased to levels not seen since 2013 as shortages and panic buying at the pump hit hard. Gas and electricity bills also look set to rise significantly in the coming weeks.
All this will put real pressure on household finances in the midst of a pandemic and on the cusp of another surge in unemployment.
Scottish retail sales remain 10% lower than before COVID-19 because of the uncertainty.
Levels of employment and unemployment remained relatively stable in Scotland. However, furlough – which has protected incomes and supported the wages of over 11.6 million workers at a total cost of £70bn – came to an end on 30 September.
In late July, 1.6 million people across the UK were still on furlough, with 900,000 of these fully furloughed. Nevertheless, a million people were made redundant between April 2020 to June 2021.
In Scotland, joblessness was at 4.3% before the Coronavirus Job Retention Scheme ended, down slightly from 4.4%.
However, it is likely that unemployment will now rise again without continued taxpayer support for jobs and wages, compounding what may be a difficult winter for many workers and their families.
David Kelly is policy manager at SCDI