Warning food prices could soar by 20% as pressure mounts on Reeves over flailing economy
Exclusive: Fears of a massive rise in the cost of imports have fuelled calls for Rachel Reeves to cancel her China trip with warnings that the UK is on the cusp of a financial crisis and recession
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Your support makes all the difference.A shocking report has revealed that Rachel Reeves’ economic woes could get even worse with rises of up to 20 per cent for imports fuelling a new cost of living crisis.
The fresh concerns come as the chancellor is under severe pressure to cancel her controversial trip to China as the UK economy faces another tumultuous day on the markets.
As well as problems with the UK’s supply chains a series of indicators linked back to Ms Reeves’s Budget in October have put the UK on the cusp of a financial crisis and recession. These include:
- Gilts underpinning government debt at a higher level than the crisis which forced Liz Truss out of office.
- Concerns that Ms Reeves will shortly be forced to abandon her “gold rule” on borrowing.
- Fears she will be forced to raise taxes further in the spring.
- Business confidence at an all time low with the government with chief executives claiming that Labour lied to them before the election.
- Wage and recruitment freezes because of the National Insurance hike.
Ms Reeves sent out her deputy Darren Jones, the chief Treasury secretary, to face an urgent question on the state of the economy in the Commons on Thursday with opposition MPs claiming that she had gone into hiding.
The row came as disgraced former prime minister Liz Truss launched a legal challenge to clear her name over her disastrous mini-Budget which Labour is blaming for the country’s economic crisis.
Shadow home secretary Chris Philp blamed Labour for the soaring cost of government borrowing and said Ms Reeves “should stay in the UK fixing the mess her Budget has created”.
Liberal Democrat leader Ed Davey hit out at the Tories’ handling of the economy but also said Ms Reeves should cancel her visit and instead make an emergency announcement scrapping her national insurance hike, which his party has dubbed a ‘jobs tax’, and rebuild trade links with Europe.
On Thursday the pound tumbled to its lowest level against the US dollar for over a year as borrowing costs continued to surge, heaping more pressure on the government’s economic and spending plans.
Mr Jones told MPs that UK gilt markets were continuing to "function in an orderly way" and there was no need for any kind of emergency intervention.
But Reform deputy leader Richard Tice, a millionaire businessman, told him during exchanges that the “country is about to plunge into a financial crisis.”
He later added: “We have seen with the markets before that when confidence goes it goes quickly and it’s brutal. That’s what we are facing.”
Mr Jones faced jeers from opposition MPs who demanded to know where Ms Reeves was, with shadow chancellor Mel Stride hitting out that she was “nowhere to be seen” and one Tory accusing her of already having “fled” to China.
Ms Reeves is due to jet off with a delegation of City grandees as Labour seeks closer links with Beijing as part of its bid for economic growth.
However, a report seen by The Independent by the Chartered Institute of Procurement and Supply (CIPS) suggests that things are set to get even worse because of an international crisis in supply chains set to increase the price of imports by 5 to 20 per cent.
This calculation comes before the impact of any tariffs that Donald Trump may impose with the incoming president threatening a global trade war.
CIPS, which has 64,000 members across 150 countries highlighted the five biggest challenges identified by procurement and supply chain professionals going into 2025 as inflation, geopolitical instability, workforce and labour issues, supplier instability and cyber security.
Any increase in the cost of imports for businesses is likely to be passed on to customers and items affected include food and drink, electronics, machinery, chemicals, petroleum products and other vital supplies and household staples.
Ben Farrell, chief executive of CIPS, noted: “We have seen multiple examples in the last year of our members stepping up to the plate on these issues, helping the organisations they lead and advise, deal with the challenges they present. From disruption in the Red Sea, drought impacting the Panama Canal, climate change and war in the Middle East and mainland Europe, CIPS members are playing a critical role navigating these strategic risks.”
The issue has been made even worse by Brexit with the UK isolated from the cushioning effects of the EU and single market. Ms Reeves’ Budget and the reforms to workers rights have also severely impacted labour costs.
Mr Farrell said: “Going into 2025 what is clear from our research is that there are a number of strategic challenges that are likely to disrupt the smooth flow of goods and services.”
“These will present particular challenges for consumers, who are likely to be disproportionately impacted unless these issues are managed effectively.”
“The impact of US tariffs on trade flows, giving rise to increased political tension, the global war for talent - these and other issues will need deft handling if growth, as well as consumer confidence across the major markets, is to be maintained.”
Earlier, Mr Philp, who served in the Treasury under former Tory MP Liz Truss, told The Sun the Chancellor should be fired.
“Bond yields are higher than when Kwasi Kwarteng got sacked,” he said. “The whole government should be fired, frankly, including Rachel Reeves, because they jacked up taxes, they crushed pensioners, they're crushing farmers. They're crushing businesses with their high taxes. And this is the result, because the bond market can see that our economy is being squashed by this Labour government.”
Sir Ed said that instead of jetting off to China, the chancellor should “urgently” tell MPs she will “cancel her counterproductive jobs tax and set out a real plan for growth”.
He also hit out at the Tory party for the turmoil saying the country was paying an “ever-higher price for the total mess the Conservative Party made of our economy”.
“The chancellor needs to realise that she’ll never dig us out of this hole without a far more ambitious plan to grow our economy, including rebuilding trade with Europe,” he added.
Responding to an urgent question in the Commons Mr Jones said UK gilt markets "continue to function in an orderly way".
He told MPs: "There should be no doubt of the Government's commitment to economic stability and sound public finances; this is why meeting the fiscal rules is non-negotiable."
He also went on to accuse the Conservatives of having "crashed the economy" when in power. He also defended the China trip saying it was “important” for UK trade and would continue.
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