One obvious factor which possibly could explain it, and which all the usual suspects will seize upon, is Brexit. Indeed, that leading usual suspect, the former Governor of the Bank of England Mark Carney, has done exactly that.
Is there a reasonable case here? Brexit has made trade with the continent a little more expensive and cumbersome, thereby raising import costs a bit.
And there have been few trade deals with the rest of the world to bring offsetting cost and price reductions. Moreover, Brexit has reduced easy access to a large pool of highly skilled and motivated labour from eastern Europe.
Mind you, it is unclear why this should have been so important when overall immigration has actually increased. Meanwhile, Brexit has been a contributory factor to the weakness of business investment.
Some commentators have drawn attention to the fall in the pound after the Brexit vote. This will undoubtedly have tended to raise UK costs and prices, but that big fall was now some seven years ago and since then the pound has been pretty steady.
True, it had a major wobble during the Truss/Kwarteng episode last September and October, but that was very brief and the currency quickly recovered. Indeed, over 2023, the pound has been strengthening. Brexit cannot be anything other than a marginal influence.
Another easy answer is “the Bank of England”. Were it not for Threadneedle Street’s lethargic approach to raising interest rates, the argument runs, we wouldn’t be where we are today.
I have been forthright in my criticisms of the Bank and I do believe that if it had acted more vigorously then the inflation rate would currently be lower and we would now be set on a clear downward path. But there is more to it than that.
