VLADIMIR Putin’s declaration of war on Ukraine will have a knock-on effect on day-to-day spending for the average Brit.
Energy bills, grocery costs, fuel totals and mortgages could all take a hit should Boris Johnson’s “barrage” of economic sanctions continue in response to Putin’s terrifying full-scale assault.
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The Russian tyrant plunged Europe into a bloody new crisis when he declared a “special military operation” in Ukraine with a dawn raid.
He spent months amassing his forces on the border and brazenly lying to the world about his plans to invade.
Mr Johnson on Tuesday announced his “first barrage” of sanctions on five Russian banks and three Putin “cronies”.
And foreign office minister James Cleverly this morning said the PM and other world leaders will announce “unprecedented sanctions” that will bring Russia to its knees later today.
Should Russia opt to retaliate with prolonged sanctions of their own, UK costs face dramatic increases, experts have warned.
Here, we break down the four key costs set to increase due to war in Ukraine.
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Energy costs
As Putin unleashes what could the most horrific crisis since World War 2, Brits face shocking knock-on effects to their every day spending.
Russia is one of the world’s largest oil and gas producers, supplying Europe around 40% of it’s gas.
While Britain only imports around 5% of it’s gas from Russia, the UK relies on pipelines that run through Belarus, Poland, Ukraine and into Germany.
Should tension with Russia continue, Putin could opt to cut off supplies to Europe all together.
The wholesale price of energy jumped 33% yesterday to 285p per therm. It is an increase of 65% since Monday.
And it could go up further – soaring by 20 times to 1,000p (£10) per therm in a worst case scenario, meaning households energy bills could spike.
Experts have said there is no chance of the UK’s energy supply being cut off entirely or of the country running out of fuel.
However, prices will be affected even if the flow of fuel is lessened slightly.
This comes on top of already soaring energy costs in the UK.
The price cap will increase by £700-per-year in April when the price cap is next readjusted from £1,277 up to £1,971.
Grocery costs
Ukraine has been historically nicknamed as the “breadbasket of Europe” due to its vast fields of wheat.
Together, Russia and Ukraine produce 29% of the world’s wheat, 19% of corn and 80% of sunflower exports.
Half of Ukraine’s production of grain could be impacted by Russian aggression – causing the cost of wheat globally to double, Rabobank analysts told the Daily Telegraph.
And Russia stopping wheat exports to the UK would only add to the issue.
Sarah Coles from Hargreaves Lansdown said: “Food prices are already rising at their fastest pace in a decade, and the price of essentials like pasta, eggs and milk is rising even more quickly.”
On home soil, British farmers are already grappling with costs after a block on Russia-exported fertiliser chemicals.
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It has caused fertiliser costs to double – leaving farmers struggling to cope.
Families are already facing higher costs at the supermarket. Rising inflation is expected to add £180 to family food bills this year already.
Tory MP Tom Tugendhat – the Chairman of the Foreign Affairs Committee – echoed warnings about rising food prices.
He told Good Morning Britain: “We need to spend seriously on our defence now – you may not like it, but the money you don’t you’ll spend on higher food prices.”
Without an investment in defence spending, Brits could face being “taxed by a hostile regime on everything we buy”.
Cost of beer
The cost of beer could soar due to a rise in barley costs.
Ukraine is in the top five countries for barley production – and the ongoing Russian aggression could halt exports.
Danish brewer Carlsberg said on Thursday that it has halted operations at two Ukrainian breweries in Kyiv and the southern city of Zaporizhzhya due to the escalating conflict.
Carlsberg – the second-largest brewer in Ukraine with a 31 per cent market share – had taken “several initiatives in Ukraine with the aim of taking care of the safety of our employees in the country,” a spokeswoman said.
She added: “We have stopped production at our breweries in Zaporizhzhya and Kyiv and have informed our employees to stay at home and follow the instructions of the Ukrainian authorities.”
Soaring inflation has already added to the price of a pint, which is likely to hit £7 is some part of the country this year.
Beer lovers have been warned the cost of a pint could reach £10.50 by 2030 if rampant inflation continues.
Roberto Rivero, of market analyst Admirals, said: “Soaring energy prices, labour shortages and the rising cost of raw materials are pushing up input costs for businesses, which in turn is putting upward pressure on prices.
“The hospitality sector would likely suffer as people began to prioritise spending on essential items, and although many of us may think that a pint of beer on a Friday night is essential, things like food and household goods will take priority for most.”
Petrol prices
Russia is one of the world’s largest producers of oil – with concerns building about how UK fuel prices will be affected as tensions rise.
The conflict has so far caused crude oil to hit $102.48 a barrel – the highest price seen in eight years.
Meanwhile, about a fifth of the UK’s diesel comes from Russia.
Should exports be cut off by Russia in retaliation at UK sanctions, diesel prices could soar again.
Diesel was already at 152.58p per litre on Monday and petrol prices have also hit record highs.
It means that it will cost drivers £82.46 to fill up a 55-litre tank with petrol – £15.08 more expensive than it was this time last year, when it cost £67.38 in total.
Forecourts have been seen charging as much as 171.9p a litre for diesel and 169.9p for petrol in some parts of the country.
Fears of increases are exacerbated as the London Stock Exchange’s leading FTSE 100 index plunged by more than 200 points, or 2.7%, within moments of opening today.
Foreign Office Minister James Cleverly said: “The exact repercussions difficult to predict.
“The truth is there will be an impact on UK economy, indeed on global economy.
“Russia is a large fuel producer. There will inevitably be a large impact on fuel prices and perhaps a knock on impact on other prices.
“Ultimately this is about ensuring that a dictatorial aggressor is not able to have a free hand, is not able to attack a liberal, open democracy without repercussions.
“There must be repercussions. Those will come inevitably at some cost to us.”
Mortgages and Savings
Interests rates could increase after Russia’s invasion of Ukraine and that ha a knock-on effect for homeowners.
The Bank of England’s rate-setters may need to hike up borrowing costs to offset soaring fuel and grocer prices, Capital Economics forecasters fear.
This means that the 2million homeowners who are on tracker or variable mortgage rates could feel the squeeze.
This is because mortgage lenders typically increase their rates in line with the Bank’s base rate of interest – and if you’re not protected by a fixed deal then your repayments will go up too.
David Hollingworth of mortgage broker London & Country said: “We could see mortgage rates pushed up further and products being withdrawn and replaced with higher rates.
“On the plus side, despite the fact that rates have already been increasing the available deals are still very low in historical terms.
“But borrowers can’t rest on their laurels – rates have been moving quickly already and any conflict could only add to uncertainty in the markets.”
Experts are already predicting five more Bank of England hikes in 2022 alone.
Increases could bring interest rates up to 1.75% from the current 0.5%.
This would add hundreds to annual mortgage repayments for households.
And if conflict in Ukraine caused interest rates to hit 2%, mortgage rates could rise to a massive 3.2% for new borrowers.
Meanwhile, the FTSE 100 plunged as the UK stock market opened over fears about the crisis.
This hits the value of anyone with a pension or investment Isa, but experts have warned that it’s best not to act on market wobbles.
Hargreaves Lansdown’s Helen Morrissey said: “It’s common to think about reducing or stopping your investment or pension contributions when the value takes a tumble.
“But what goes down comes back up and if you stick with it through tough times, you could actually benefit in the long-term.”
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