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| Credit: Andrey Metelev |
I went to bed last night feeling cold and my thoughts immediately turned to all those around the United Kingdom who are struggling with the rising cost of electricity. Especially those living in the north where it's even colder.
All winter I haven't turned my heater on. I've worn thermals, multiple layers, my beanie, gloves and a scarf. Living in an apartment means I'm fortunate to benefit slightly from neighbours heating up their flat. Those who live in houses will not be so lucky.
My fingers feel frozen at times still, even in a flat. They remind me of fish fingers which I liked to eat as a child. I manage. Gloves help, when it's practical to where them. It's just that I'm not as productive when I'mfeeling cold. I think my body must be shutting down to conserve energy because of the low temperature.
Last night, I snuggled under my duvet and reassured myself it would be warmer after awhile.
This morning I woke up feeling unsettled. My dream had been about someone trying to shoot me. They chased me. I ran. It was a faceless stranger who was faster and stronger. I never stopped longvenough to see them properly. They caught up to me and all I saw was the gun which they pointed at me. I thought my life was over.
I had a big thick, size of a telephone book, yellow dummies guide book. You know those learning made easy instructional series for beginners? They spell out in simple language and in a very basic way a dummies guide to Spanish, Facebook, gardening and cooking? My dummies book stopped the bullet from hitting my body. I'm not sure in real life that it would stop a bullet, especially since they have a soft cover, and in my dream it was a soft cover. It was a dream. I didn't die. It was a win.
I'd been thinking about writing this blog post for awhile, so with the memory of this dream, before going to bed, I decide I should just do it.
The human cost of the electricity price rise
Before the pandemic, it's estimated by the Office for National Statistics that there was 25,600 excess winter deaths in Great Britain in 2018/19. People aren't literally freezing to death necessarily, but they are linked to the colder weather with the leading cause being respiratory illness. Electricity and heating is critical in the UK.
Ofgem, Britain's energy regulator estimates that from 1 April, approximately 22 million customers will see their annual electricity bills rise by £700, with customers paying £2.000 per year. These are customers on default tariffs paying by direct debit, but everyone else will be affected when their contract ends.
To put this in context, the average UK salary was £24,600 at the start of 2022 according to HMRC, the UK department responsible for tax collection. That means electricity could make up 10% of your income. For every ten day a person works, one day is going towards your electricity bill.
The entire country is facing rising electricity and their concern, like mine, is that it is going to keep getting higher. We are united in feeling threatened. Our minds are twisting, troubled, trying to figure out what to do. There is a sense of powerlessness and that we are being ignored.
For me, the solution is books, writing and sharing stories. Awareness of the problem can help with finding a solution. Communicating the issues is a part of that. This is what this post is trying to do.
We live in a country which is meant to represent the great Western democratic life of opportunity, hopes and dreams. This is meant to be Great Britain. It is becoming a poor Britain with more people likely to lose their homes and everything they have.
From a population of 60 million, around 1.3 million people could be pushed into absolute poverty, according to economists at the Resolution Foundation think tank.
The leaders of this country do not seem to realise how bad things have become. The reality is that people are feeling like the government and our system has failed us.
The human cost is there. The media have tried to convey the seriousness of the situation.
There are rumblings about people wanting to strike. It is fast developing into a broader domestic crisis.
Today there was a news story about an 82 year old man spending all day on buses and trains to keep warm. Can you imagine spending your retirement in this way?
"It feels like a waste of 40 years of my life going to work. I started work in the 1954 I didn't think I'd be in poverty in old age," pensioner Graham Childs says.
The public can empathise and understand this is not the sort of country we want.
In the news story, Graham was interviewed and it was shared on Twitter. Here are some of the comments in response:
"I'm also the same. I worked for the NHS and had a life changing accident and can no longer work, I was pushed into universal credit where the goverment can hide me and now i have to chose to have heat or eat, I can't evan have a shower more than twice a week."
"This is not some kind of publicity stunt it’s happening all over the country. You cannot beat a good, long, warm bus ride on a cold day. Sandwiches and a flask is better than sitting in a freezing home or a cold bed. It’s the only way many old and lonely people get out."
"This is real, this hurts people. In modern Britain this is how we are living."
The politicians don't seem to get it. They only think about donors, the economics and winning elections. That is why I'm setting out below how this is bad for them too.
This is how businesses are affected
The electricity price rise is not just a cost to individuals, but also to businesses. Businesses will raise their prices. Some businesses will fail as cash flow will dry up. Meeting increasing costs with falling demand will be challenging.
Remember the financial crisis and the domino effect of first small financial institutions failing? Then it snowballed to bigger ones until the system nearly collapsed. Well that near apocalyptic fate could happen again.
I had ring side seats. We were on the edge. The years of austerity that followed were devastating. Recovery took a long time, compounded by the crisis becoming a global event.
The economy will suffer
We are facing the barrel of a gun. The pandemic is not over. It does not matter how many times the media and government parrot we are living with covid. There has been an accumulation of events that have destabilised our system - shipping, the supply side and now inflation.
Economic collapse from the downturn experienced during the pandemic was staved off by throwing money at it. Some of it went down the drain in fraud, billions in unuseable PPE and dubious contracts to individuals connected to politicians.
It is unlikely there is enough money to throw at another downturn, especially if they try to resuscitate the economy when it it too late and we are too far gone. The UK is walking the line of not having astronomical debt that will result in a credit downgrade and make matters even worse.
The barrier to raising electricity prices has been lifted. It is like letting the dam burst.
As mentioned, businesses are forced to raise prices because of higher electricity costs. It creates even greater inflation.
We are all preparing for higher electricity prices, becoming more cost conscious, which reduces demand.
Add in huge levels of uncertainty. It is hard for anyone to see how the growth in costs will not be exponential and how or when it will plateau.
Uncertainty affects confidence which is a key foundation for strong growth. We are on shaky ground.
So we have:
- spiralling inflation,
- more poverty
- less money coming in from taxes
- more people going on benefits
- businesses failing
- rising unemployment
- uncertainty
- falling business confidence.
This is a recipe for a huge economic mess. Put all this into a blender, mix it up, bake and when it comes out of the oven, it's an unappetising cake that no one wants to eat.
This affects the rich guys donating to political parties. It impacts large businesses. A recession is not good for their bottom line or net worth.
The government is burying their head in the sand about the problem. Perhaps they think they can capitalise on it. Historically, political parties have taken advantage of economic downturns, but the circumstances of this one should make politicians pause and re-evaluate. The party-gate scandal and promised prosperity of Brexit has left many voters dissatisfied. Add in they are all poorer with the cost of living crisis and sone poll results showing how people might vote, well the maths suggests a change in government is higher than the encumbent political party might like.
Aside from the politics, Britain's international standing will take a hit if they go into a recession and drag down other countries' economies.
It's a global problem
There is a ripple effect to a UK recession. We operate in a global economy and a recession in the UK will impact other countries.
That's right. I'm using the R word. There will be a RECESSION. People are scared to say the word. Before the financial crisis, for months everyone knew it was coming. They just rode the wave hoping they wouldn't be wiped out.
There will be a UK recession, but what about the rest of the world? Well, they'll be affected too.
In 2020, the UK exports to the EU were £251 billion (42% of all UK exports). The UK is the fourth-largest importer in the world. Those french cheese makers, the wineries in Italy, the tourism industry in Spain all benefit from a thriving UK. Europe will certainly be affected.
A quote from Former Chair of the Federal Reserve of the United States, Ben Bernanke:
"The crisis in Europe has affected the U.S. economy by acting as a drag on our exports, weighing on business and consumer confidence, and pressuring U.S. financial markets and institutions."
This is how the global economy operates now. Even large countries like America can be pulled down. Whilst the UK is not Europe and is no longer part of the E.U, it is the fifth-largest national economy in the world measured by nominal gross domestic product (GDP). In 2020, the United Kingdom's contribution to the global economy based on Purchasing Power Parity (PPP) was 2.24 percent.
You might say 2 24 per cent is not much. Why worry? Well, you see UK businesses have dealings with companies in other countries. Their failure or falling profits impacts others. Plus, investors around the world start to get nervous when large nations start to falter. It's not good for business confidence generally, anywhere in the world.
The take-away
Prepare for a recession. It is increasingly becoming more of an inevitability. Save where you can. Cashflow is important in a recession. Downsize now. Work while you can. Jobs may be gone soon.
The other thing is to continue to try to get the UK government to take meaningful action that will prevent all the disastrous implications of allowing electricity prices to rise so significantly.
Prepare for the worst and hope for the best. One of my areas of expertise and experience is in analysis. The risks are substantial and we are going to have problems not stepping on the minefields.
I'm going to bed now, feeling cold again. I hope I won't dream about guns and the need to survive, because our waking hours have very much become about trying to dodge bullets. This is just the beginning.
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