Inflation Pressures Growing in the U.K., Says NatWest’s Davies
Inflation Pressures Growing in the U.K., Says NatWest’s Davies
(Bloomberg) --
The U.K. is facing further strain from inflation, with pressure growing from import costs and a tight labor market, according to Howard Davies, the chairman of Natwest Group Plc.
“I do find it quite worrying in the U.K. because we’ve got a peculiar labor market with a lot of vacancies,” Davies said in a Bloomberg TV interview Thursday. “A lot of people have left the labor market but it appears many of them are not coming back.” Index-linked pension rises and a looming jump in retail energy prices will also play a part, he said.
Central banks globally are “playing catch up to inflation,” he added, after the Federal Reserve signaled late Wednesday it could move more quickly on its next rate hike. For now, consumers are “still fairly cash-rich” and banks are yet to see a spike in loan impairments, said Davies, who is also a professor at Sciences Po in Paris.
For the coming year, “my biggest worry is whether the government can stabilize the national finances,” Davies said, pointing to disquiet in Boris Johnson’s administration for planned tax rises in April to boost the Covid-battered health-care system while avoiding even greater public borrowing. “I think this is a delicate thing and that’s why the Treasury is, as we understand it, staying firm,” he said.
NatWest’s gradual return to offices under its post-Covid flexible working model is “more or less put on hold” and “something like 20% of branch staff are currently off,” mostly to self-isolate under U.K. rules, according to Davies.
©2022 Bloomberg L.P.