Inflation has clearly arrived and a Europe wide recession may follow in 2023, although there are positive steps we can take.
A recent OECD report was hard on the UK, suggesting the lowest growth in the G7 for 2023, with only Russia performing worse in the G20. Unwelcome news, although much of Europe will see pressing times.
A global slowdown is part of the cause, created by Covid and the war in Ukraine. Higher interest rates and taxes are evident, energy and food costs have risen significantly, trade volumes are lower than hoped.
UK inflation is expected to hit 10% by the end of 2022 but Europe may not be far behind us. As the chart below shows, few regions have escaped to date:
The general view is that whilst still being ahead of income rises, inflation rates will slow by 2023, perhaps halving by the end of that year. Circumstance will determine this to a degree, although we can all help.
Supportive Action
The starting point has to be global cooperation, temptation is inevitable but this is not a time for restrictive trade measures, or arguing about them. Everyone’s economy is influenced by the behaviour of trading partners.
Monetary policy at national level can help in practical ways and send the right signals. At a smaller level, we can all take decisions as individual companies, which help to influence financial outcomes.
The OECD’s point on the burden needing to be split between profit and wages is valid. Businesses are there to make money, which we need them to do, yet they will have to be realistic. Those working within should do the same.
If pay rises constantly match inflation, this is less likely to end. As unfair as this can feel, we will all need to bear the brunt to a degree and accept imbalance, those on lower pay may require a higher percentage increase.
Opportunities Arise
The old maxim of progress through adversity holds true for the current situation. We need to ensure energy security but this can be done by focusing efforts on renewable energy, rather than planet damaging fossil fuels.
This is a sound route for encouraging ongoing investment, which is essential to beat inflation. The smart money will however be on working smarter, creating profit through efficiency and improved productivity.
Our sector can play a part, from food security, to seeing better profits, improved transport and logistics matter. We work each day with an example of the way a viable system can make a difference.
A Stable Future
The UK leaving the EU brought systemic disruption, this has been countered to a fair degree but problems and losses in profit remain. An exception to this has been the route chosen for temporary exports to and from Europe.
ATA carnets filled a policy hole and have done so remarkably well. There is a cost but moderate and often spread between items, or multiple trips. Delay is avoided, business life proceeds pretty much as before.
We are not suggesting that ATA carnets can solve inflation, although they are an example of what is needed. Smart systems which aid, rather than get in the way, the approach we all have to take to get ahead.
If you happen to need an ATA carnet for the EU, we will be pleased to help. In everything else you do, a viable approach and sound management will make a difference. A government can do so much to beat inflation, we can do more.
Trade is an important deflationary weapon and as much as governments try to set rules, is run by people on the ground. Bringing stability back to the economy is in our hands, through looking to the future.