Shoppers have been putting on a brave face about having to fork out almost a fifth more for their Christmas dinners this year, as the Brexit-inspired slide in sterling pushes grocery bills sharply higher.
But stiff upper lips were beginning to tremble on Tuesday as it became clear that festive visits to friends and family will also cost a whole lot more following the unexpected closure of a major North Sea pipeline.
The shutdown of the Forties system, which supplies around 40 per cent of the UK’s oil and gas, follows the discovery of a hairline crack in the 235-mile pipeline during routine maintenance. The news sent the price of benchmark Brent crude oil soaring through $65 a barrel to its highest level in 2½ years.
Operator Ineos reckons the shutdown could last three weeks, with the supply problems compounded by disruption caused by an explosion at an Austrian gas hub, together with reduced gas flows from Norway. The timing could hardly be worse, as the cold snap pushes demand sharply higher.
For the consumer, the likely result is an extra 3p on the price of a litre of petrol by Christmas, an unexpected addition to the seasonal spending bills.
“This really isn’t what drivers need at Christmas when many are travelling longer distances to spend time with family and friends,” said the RAC’s Simon Williams. The increase comes as motorists are already paying the highest price at the pumps in three years, he pointed out.
It would increase the cost of filling up a family car with petrol by £1.65 to £68.07, or £69.42 for diesel drivers.
Squeeze
This latest blow to household budgets came as the official inflation rate climbed through 3 per cent for the first time in almost six years, rising to 3.1 per cent on the consumer prices measure.
With just 12 days until December 25th, retailers will be dismayed by the impact of headlines on rising inflation and fuel price rises on already weak consumer confidence
This is its highest level since March 2012, tightening the already severe spending squeeze on households. Food inflation was a key factor, rising from 4 per cent to 4.1 per cent, a four-year high – and twice the current rate of wage growth.
Economists reckon this is likely to mark the peak for inflation, as the higher cost of imports following the fall in sterling after the vote to leave the EU works its way out of the comparable figures of the previous year. However, that is little comfort to the millions attempting to balance their household budgets right now.
Liberal Democrat leader Vince Cable has no doubt who’s the Grinch this Christmas – the government. “Flights and fuel have gone up, making it more expensive to visit relatives, and the price of video games has also risen, making it harder for parents to give their children a decent Christmas,” he said.
With just 12 days left until December 25th, retailers will be dismayed by the impact of headlines about rising inflation and looming fuel price rises on already weak consumer confidence.
Many shoppers have so far managed to shrug off rising prices in pursuit of a cheery festive season. Industry observers say the shopping spree is in full swing and consumers are forecast to spend a record £4.2 billion on groceries in the week before Christmas, according to the Nielsen consultancy. However, a third of households will spend less on food and drink this year, says Nielsen.
Rival
Meanwhile, figures from Kantar Worldpanel showed the discount supermarket group Aldi had regained its place as Britain’s fastest-growing grocer over the last quarter, pushing its sales up by 15.1 per cent year-on-year. Rival Lidl was marginally behind at 14.5 per cent.
Those who do cut back their spending will have some difficult choices to make. According to a recent survey, the UK’s cheapest traditional Christmas dinner with turkey and all the trimmings will cost £2.94 a head – an increase of almost 20 per cent on last year.
Most economists had expected the cost of living to remain unchanged on the previous month, at 3 per cent. Inflation is now more than a percentage point above the government’s 2 per cent target, which means Bank of England governor Mark Carney will have to write a public letter to chancellor Philip Hammond, explaining why he has failed to bring inflation under control.
One commentator suggested a “Dear Chancellor” letter consisting of just one word would offer explanation enough – “Brexit!”
Whatever Mr Carney puts in his missive, the rest of us won’t be able to read it until next year, as it will not be published until February, when the next quarterly inflation report is released.
By then, we’ll undoubtedly have other Brexit-inspired problems to worry about.
Fiona Walsh is business editor of the guardian.com
