A Study of Inflation in the UK’s Economy in 2021 and 2022

Abstract

After COVID-19, global economies have been hit to various extents, and inflation has become one of the global problems. Moderate inflation can promote economic growth, but excessive inflation can lead to higher cost of living and production costs. Therefore, controlling inflation has become one of the main goals of most countries. This article aims to find a new way to improve the abysmal economic situation in UK. The article analyzes how COVID-19, Brexit and rising energy affect the inflation in UK from 2021 to 2022. This study also evaluates the effectiveness of the policies that imposed by Boris Johnson government and Elizabeth Truss government, including tax policies and labor market reform to correct cost-push inflation. From the results of the analysis, it is clear that the UK needs a strong and stable government to maintain long-term geo-political situation. It could go a long way toward easing inflationary pressures, but this depends on the attitude of the government. Otherwise, the fact proves that demand-side economic policies are ineffective under existing situation, and that only supply-side reforms can inject new vitality into the UK economy.