Originally published October 2022.
In what follows, I will do my best to remain as sensitive to the calamitous human toll the war in Ukraine has and continues to take. Do my best to do so, in the context of trying to gauge what impact these shocking events will have on the UK economy.
As things stand, the invasion of Ukraine has triggered a surge in the cost of energy for households and businesses across the UK. In doing so, the war fuelled inflation in a UK economy already beset with the virus. An unavoidable consequence has been UK interest rates rising to a higher peak than had otherwise been the case, with all the inevitable unwelcome consequences. So much then for the first-order effects of the war on the UK.
“As insensitive as it may seem to say as much, there have been nations which are coming out rather well from events”
To predict the second order, third order and thereafter effects on the UK, one must understand what the events in Ukraine will mean for not only its neighbours or wider continental Europe, but all nations, far and wide. And by ‘will mean’, I am referring to economic harm and, yes, economic good. For as insensitive as it may seem to say as much, there have been nations which are coming out rather well from events. And such comparative context matters crucially if we are going to be close to accurate in predicting what awaits the UK.
The simple truth is that the dark events unfolding to the north of the Black Sea have not impacted all nations equally. First, they have obviously been far more troubling for the economies of nations proximate to events and/or hitherto more heavily engaged in trade with Ukraine and Russia. Far more troubling, that is, than for a UK geographically and commercially more distant, and we could well see the UK’s relative advantage turn into an absolute one. If the ongoing crisis in energy and trade hitting EMEA nations imperils their economies and currencies, the UK could well see the even more rapid return of EU nationals with settlement status who departed when coronavirus struck. There is also certain to be a wider surge in applications for UK work visas; lest we forget, the UK issued 134,000 visas to Ukrainians in the first half of 2022, almost all of whom are eligible to work. Moreover, in these alarming inflationary times, faltering of economies and currencies across EMEA could not fail to release disinflationary forces into the UK.
