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City comment: New year, same problems — inflation, supply chains and finding staff

·1-min read

Happy new year, if it’s not too late to still be saying that.

There are reasons to be cheerful as we start 2022. Certainly the outlook is more upbeat than it was just a few weeks ago.

Data on the Omicron variant of Covid-19 suggests further restrictions on everyday life beyond Plan B aren’t likely. London appears to be reaching — or perhaps already beyond — the peak of this wave.

On the stock market, the FTSE is starting the year on the front foot, rising smartly thanks to a wave of global optimism.

Don’t get carried away, though. Deeper problems persist.

Inflation remains a very real threat and there are growing fears among economists that price rises could breach 7% in the months ahead. If you’ve been landed with an energy bill recently, it may feel like inflation is already there.

Supply chain issues, while easing, remain a headache. New Brexit customs controls, which began on January 1, won’t make things any easier.

Finally, labour shortages continue to trouble many companies. The issue has only been exacerbated by Omicron and the accompanying wave of Test and Trace isolations.

All that is set to drag on the economy in 2022. City scribblers expect growth to slow sharply this year. It won’t be disastrous — growth should still comfortably outpace pre-pandemic averages — but it’s a downer none the less.

Businesses need to start investing to spur growth beyond just a bounce back. Otherwise the economy could lose its fizz like new year’s bubbly on January 1.

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