Rising prices threaten the UK with massive bankruptcy

A record rise in the inflation rate could lead to massive bankruptcy of small and medium-sized enterprises in the UK. Experts predict that the funds of a significant number of ordinary consumers may run out in the coming weeks. If this happens, hundreds of companies may find themselves without a clientele and will be forced to declare their default, and their staff will become unemployed.

This forecast was made by the head of the British Federation of Small Businesses Martin Mcteg. His words are quoted by The Guardian in its publication dated May 30, 2022. According to Mcteg, more than 50% of small businesses may have enough cash only to maintain operations for the next three months.

According to the official statistics of the kingdom, consumer prices in the country increased by 9% in April 2022. This level of inflation has become a record for the UK. The last time such economic phenomena were noted 40 years ago.

The reason for the sharp increase in costs for ordinary Britons were the prices of fuel, food and electricity bills.

In May, the Bank of England made a forecast of further inflation. According to the regulator, inflation may reach 10.25% by the end of 2022. Prior to that, the Bank had forecast inflation in the fourth quarter at the level of 5.75%.

Many companies in the country faced an increase in raw material prices. In 2021, prices rose by 18.6%. To stay afloat, many firms are forced to raise the cost of goods, thereby further contributing to inflationary pressure.

Millions of residents in April faced an increase in the cost of gas and electricity by £700 per year. The reason was the price increase by 54% at once. Mcteg cites the example of a hotel owner where electricity bills showed a five-fold increase compared to pre-crisis prices.

On May 26, the Ministry of Finance announced the adoption of a new anti-crisis package. It is supposed to allocate £15 billion, which the country's authorities want to direct to fight inflation.

Oil and gas companies will be forced to temporarily deduct 25% of the excess profits received to the country's budget.

About 8 million poor citizens will receive one-time £650, the government promises to pay another £300 to 8 million pensioners and £150 to disabled people.

The Chairman of the Federation of Small Businesses called on the authorities to once again help small and medium-sized businesses. Otherwise, the huge financial reserves that the state allocated in 2020 and 2021 to support the economy during the pandemic may be paid in vain.