Robert Jenrick has warned that the UK could face ‘the most difficult economic year that we’ve seen in our lifetime’ amid the heavy sanctions imposed on Russia following its invasion of Ukraine.
The Tory MP described how the country could be looking at ‘an energy crisis unrivalled since the 1970s’ and said the government had to ‘level with the public that standing up to Putin could cause the most difficult year for household incomes’.
He went on to say that the inflation that has been predicted could peak at 10 per cent and see increasing pressure on energy bills, not just for households but also for energy intensive industries and businesses.
It comes as experts from the Centre for Economics and Business Research predicted that the war in Ukraine could see another £1,259 added to household bills in the UK this year.
Speaking to Kirsty Wark on Newsnight Mr Jenrick said: ‘We could be looking at an energy crisis unrivalled since the 1970s and the forecast that we saw today suggests that household incomes could fall by a larger percentage this year that any time since records began in 1955.’
Asked about whether Chancellor Rishi Sunak needed to take action he continued: ‘I think he may need to do something, it depends on the scale of the challenge. But it looks as if this is going to be the most difficult economic year that we’ve seen in my lifetime.’
Mr Jenrick went on to say that rising inflation would mean the government would need to take a ‘more pragmatic energy policy’.
He added: ‘If you see the kind of inflation that’s been predicted, potentially peaking at 10 per cent and you’re seeing this pressure on energy bills, not just for households but also for energy intensive industries and businesses, it’s going to be very difficult.
‘It also I think means that we need a more pragmatic energy policy where we balance all of our concerns.
‘Obviously net zero, which I’m personally very committed to, but also people’s household incomes and energy security in a far more nuanced way than we’ve seen in recent years.’
Asked if the economic difficulties could see some companies requiring a bailout he said: ‘Some might need that yes.’
The MP added: ‘You’ve now clearly got to wake up and balance net zero with other competing demands. Energy security and the pounds in the pockets of people in this country.
‘And that to me means, of course, continuing to go hell for leather for renewables which is ultimately the way out of this and guaranteeing our security.
‘But also, maximising the recovery of gas and oil in the North Sea. Potentially reopening – I personally was always a supporter of fracking. I don’t think it’s a quick fix, but I think we should be revisiting that question.’
His comments come as CEBR deputy chairman Doug McWilliams called on Mr Sunak to cut fuel duty or temporarily reduce VAT amid the war in Ukraine.
He told The Sun: ‘There has never been anything like it. It’s semi-wartime effect. I don’t think the Chancellor can get away with doing nothing.’
It also comes as Boris Johnson reportedly told ministers he wanted to see a return of fracking in the UK after the country followed the US and banned Russian oil imports, The Telegraph understands.
Yesterday Britain banned Russian oil imports as drivers started queuing for fuel after being hit by the steepest weekly hike in fuel prices in more than 18 years due to Russia’s invasion of Ukraine – with prices expected to keep rising.
Oil prices are rising at an alarming rate sparking warnings that petrol could soon hit £2 a litre – taking the cost of an average tank to more than £100 – an increase of around £17.
Unleaded hit an average record of £1.55 a litre yesterday, with industry sources saying it was likely to rise to £1.75 by next week as 5p is being added to the price every 24 hours in some areas. But prices at some forecourts are already pushing £1.80.
Motorists queued outside a Sainsbury’s petrol station in Cambridge yesterday as they rushed to fill up cars and jerry cans before petrol prices increase even further. There were also long lines at the pumps at a Tesco in neighbouring Suffolk. On social media there were also reports of queues at supermarket pumps in Lancashire.
US President Joe Biden has decided to ban Russian oil imports, toughening the toll on Russia’s economy in retaliation for its invasion of Ukraine, according to a person familiar with the matter, and the European Union this week will commit to phasing out its reliance on Russia for energy needs as soon as possible.
Filling the void without crippling EU economies will likely take some time – natural gas from Russia accounts for one-third of Europe’s consumption of the fossil fuel.
The White House said Biden would announce on Tuesday ‘actions to continue to hold Russia accountable for its unprovoked and unjustified war on Ukraine.’
The US does not import Russian natural gas.
Boris Johnson has said the move to ban Russian oil and gas will punish Vladimir Putin’s regime but will be introduced in a way that ‘won’t affect’ UK businesses.
Speaking to broadcasters, the Prime Minister said: ‘The UK is less exposed (than European allies) but clearly we do have diesel that comes from Russia and we can’t move overnight.
‘But we can certainly do it and we can do it in a way that doesn’t disrupt supply, that ensures we have substitute supplies on stream in an orderly way and in a timetable that won’t affect UK business, won’t affect UK manufacturing, road haulage or other parts of our industry but will punish the regime of Vladimir Putin.’
Business & Energy Secretary Kwasi Kwarteng yesterday revealed that the UK would ‘phase out the import of Russian oil and oil products by the end of 2022’.
He added: ‘This transition will give the market, businesses and supply chains more than enough time to replace Russian imports – which make up 8% of UK demand.
‘Businesses should use this year to ensure a smooth transition so that consumers will not be affected. The government will also work with companies through a new Taskforce on Oil to support them to make use of this period in finding alternative supplies.
‘The UK is a significant producer of oil and oil products, plus we hold significant reserves.’
He added that the market has ‘already begun to ostracise Russian oil, with nearly 70% of it currently unable to find a buyer’.
‘Finally, while the UK is not dependent on Russian natural gas – 4% of our supply – I am exploring options to end this altogether,’ he wrote.
The UK is planning to buy more oil from the US, Saudi Arabia and the Middle East instead, but wants nine months to sort out the deals.
The move is expected to be announced later and will lay out the ban and its phase-in period, which is expected to last about a year to try to stop people panic-buying fuel at a time when energy prices are rocketing.
There will not be a ban on Russian gas – but this is still under discussion within the Government. US President Joe Biden has decided he will ban Russian oil and gas immediately.
It came as Rishi Sunak was urged to put the City of London on a ‘semi-wartime setting’ amid fears the Ukraine conflict could spill further into Europe. The Centre for Economics and Business Research has predicted that GDP growth this year will be slashed from 4.2% to 1.9% in 2022 and down to zero in 2023.
Amid fears energy bills could soon hit £4,000-a-month, the average price of a litre of petrol at UK forecourts rose from 149.2p on February 28 to 153.0p on Monday, according to the Department for Business, Energy and Industrial Strategy (BEIS).
Average diesel prices rose from 153.4p to 158.6p over the same period. The weekly increases of 3.8p for petrol and 5.2p for diesel are the largest in records dating back to June 2003.
They mean the cost of filling up a typical 55-litre family car has increased by more than £2 over the past week. Figures from data firm Experian Catalist based on a different methodology to the one used by BEIS suggest the average cost per litre of petrol on Monday was 156.4p, while diesel was 162.3p.
Oil prices have spiked due to concerns over the reliability of supplies amid the war in Ukraine.
The price per barrel of Brent crude – which is the most commonly used way of measuring the UK’s oil price – reached 139 US dollars on Monday, which was its highest level in 14 years
There were long queues outside the Sainsbury’s petrol station as prices hit a record high due to the Ukraine crisis affecting oil prices.
Some drivers even took along extra containers to fill with petrol, with the price at pumps expected to go up again. UK petrol prices have hit an average of 155p a litre, according to the AA motoring group.