It may lack some of the nautical drama of the Cod Wars but the egg wars – fought not between Iceland and the UK but supermarkets and their suppliers – is perhaps going to have a longer-lasting impact, at least for those of us who aren’t Reykjavik-based pescatarians. In short, a combination of input costs going through the roof and supermarkets being broadly unable to raise prices without risking punters going elsewhere and/or public opprobrium has left egg producers well and truly scrambled.
That’s a path reproduced across wide swathes of British industry. At no period in the last thirty years have consumers been so price-conscious. At no period in the last thirty years have basic input costs been so costly. The combination is toxic.
There are fingers to be pointed: at the Bank of England for moving too slowly on inflation last year, at the Treasury for help that has so far only underwhelmed, at the energy department going back as far as Ed Miliband and Ed Davey for failing to secure energy supply in the UK. Some of those decisions look worse only in hindsight – in the Bank’s case, it looked a bad idea at the time.
What then is to be done? On the one hand, the seeds of inflation’s downfall are within itself. As prices go up, demand destructs. Demand destructs, supply and demand move back into equilibrium, inflation falls. So one option is to simply wait it out and wait for the dismal science.
But as the egg wars make clear, this isn’t a couple of industries driving prices north but a broad-brush increase in almost every facet of British life: even memberships of Soho’s Groucho Club has gone up.
The Bank will opine in May, and a central bank burnt by the City’s response to its (erroneous) forward guidance at the end of the year may be reticent to offer too many views before then. That may prove to be another mistake. This is the moment perhaps for Bailey to improve his reputation with some well-judged interventions to cool City fears.