Contribute —> The UK government can't stop inflation rising - but it can act to ease the pain Wed 13 Oct 2021 12.09 BST n late summer there was a sense of hope for the UK economy, as Covid restrictions were lifted and jobs started to return. But more recently the clouds have started gathering again: prices for certain goods (such as petrol and gas) are going up and, in some cases, goods have even disappeared from shelves. Why is this happening? At the heart of this current increase in prices are global factors - most importantly the “supply chain squeeze”, the “global energy squeeze” and the “Covid bounce”.All three are hitting many countries at the same time and are testament to just how connected our world economy is. The most important factor putting pressure on prices is the global energy squeeze; we are seeing increasing prices for gas, petrol and coal. Global demand for fossil fuels is rebounding strongly as the pandemic eases - and it is conspiring with a few other factors. Among them is that the last winter was unusually cold, which not only increased demand for gas in homes in the UK but also across the globe, driving up prices internationally. Moreover, Russia is supplying less gas than expected, possibly for political reasons, further increasing prices. Oil prices too have shot back up to pre-pandemic levels. All the while, the UK government has made disappointingly slow progress in insulating its homes and building transport infrastructure that does not require fossil fuels. Had there been more progress on the phasing out of fossil fuels from our economy, the energy squeeze would be hitting us less hard. The supply chain squeeze too is pushing up prices, as a lot of goods around the world are not as readily available as they usually are. At the heart of this is that freight ships are not in the right places, as well as the lingering effects of Covid lockdowns in many countries. There are fewer container ships right now transporting goods from China to Europe and the US as would be needed. This is causing increased shipping prices and means fewer goods are being delivered than consumers are demanding. And some specific goods are in short supply. Take for example the shortage of semiconductors: these small chips that run our computers and cars are the world’s fourth most traded good. Demand for them skyrocketed during the pandemic all the while their production, in Taiwan and Malaysia, was affected by Covid shutdowns. Next comes the global Covid bounce. Prices are going up as the global economy kicks back into gear. People are buying cars and petrol to fuel them, they are returning to hotels and malls. As a result, businesses are cautiously ending their customer discounts from the past year. Indeed, inflation went up significantly in the UK compared with a year ago partly because Rishi Sunak’s “eat out to help out” scheme had reduced prices last August. Much of this is positive: it shows that many people’s incomes have held up until now, and that businesses are feeling demand for their goods is coming back. There are also some other factors more specific to the UK pushing up inflation. The UK is experiencing labour shortages in some sectors - most prominently HGV drivers, including those delivering petrol. This is due to longstanding shortcoming in training and working conditions. But it also because a lot of people have dropped out of the labour force, with young people going into education and older people retiring. It has been exacerbated by the government’s