Bank of England downgraded growth outlook to 0.6% in the fourth quarter of 2021 and experts are predicting a difficult start to 2022 due to Omicron
New cars and games consoles to lorry drivers and even crisps were among the most widely reported shortages of the supply chain crisis in 2021.
The economy was revving up thanks to the mammoth vaccine effort and lifting of the last remaining coronavirus restrictions, when the supply crunch hit.
Having pulled through from the so-called pingdemic that decimated workforces as staff were forced to self-isolate, firms were then faced with a summer of crippling shortages of HGV drivers.
Supermarket shelves were left bare, construction projects were paused due to delayed deliveries of materials and even fast food giant McDonald’s ran out of milkshakes as the haulage troubles took their toll.
Then the shortage of lorry drivers rippled down to the petrol pumps in September, causing mass panic-buying at forecourts and mile-long queues of motorists desperate to fill up their tanks. But the UK’s lorry driver shortage was just one part of a much wider supply chain problem felt by economies across the world.
In the UK, it sparked the twin threat of slowing growth and soaring inflation. Having rebounded by 5.4% in the second quarter, growth pulled back sharply to 1.1% between July and September as shortages hit many sectors, accompanied by soaring inflation.
Energy tariffs also spiked because of a 500% rise in wholesale gas prices in less than a year, while steep hikes in the cost of oil also saw fuel prices shoot up.
From starting the year at 0.7%, Consumer Prices Index (CPI) inflation had trebled by May before surging to a decade high of 5.1% in November. But the worst is yet to come, according to the Bank of England, which has forecast inflation reaching an eye-watering 6% next April, which will be the highest for 30 years.
There was a chink of light amid the gloom, with jobless figures peaking at 5.2% in the final quarter of 2020 and vacancies hitting record levels.
As the year drew to a close, there was some welcome signs that the supply chain issues that have dominated 2021 may be finally easing. Though as one crisis ends, the next begins, with the fourth wave of the pandemic leading to fears it will send the economic recovery back into reverse.
The Bank downgraded the growth outlook to 0.6% in the fourth quarter of 2021 and experts are pencilling in a difficult start to 2022 due to Omicron.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The UK economy will start 2022 on a weakened footing, and will put in an underwhelming performance for the year as a whole.”
