![\"Chancellor](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2026\/04\/Chancellor-Rachel-Reeves-is-in-charge-of-the-UK-economy.jpg\")
\t\tRachel Reeves has claimed other countries should emulate her economic approach\t<\/p>\n\t\t\tFriday 17 April 2026 11:19 am\n\t\t\t<\/p>\n
\t\tRachel Reeves has claimed other countries should emulate her economic approach\t<\/p>\n
The UK economy will not suffer from a return of persistent high inflation because its labour market is too weak for staff to demand pay rises, a top investment bank has said.<\/p>\n
In a research note, Berenberg said that the government\u2019s tighter grasp on the public finances and its rapidly deteriorating jobs market mean households are unlikely to be hit by the kind of sustained price rises seen after Russia\u2019s invasion of Ukraine.<\/a><\/p>\n \u201cFour years ago, policy was too loose and the labour market was exceptionally tight,\u201d senior UK economist Andrew Wishart wrote. <\/p>\n \u201cThe tightening of financial conditions since the war began, fiscal consolidation and the larger deterioration in the labour market than in other countries make the UK less likely to suffer worse inflation than its peers this time around.\u201d<\/p>\n The UK\u2019s jobs landscape has weakened considerably in recent months. Wage growth, which had long acted as a concern to Bank of England rate-setters, has cooled dramatically in 2025.<\/a> And according to the OECD, Britain has suffered the largest rise in unemployment of any G7 nation<\/a>, while the number of vacancies is also falling at the fastest pace this year. <\/p>\n The passage of events has left workers with little bargaining power to demand large pay rises to help manage the barrage of higher costs that are expected from the Iran war. As a result, the war is less likely to set off a so-called \u2018wage-price spiral\u2019, when inflation becomes embedded in the UK economy because higher bills and prices lead households to successfully demand higher pay packets, which in turn sets off another round of price rises. <\/p>\n UK economy in different place to 2022<\/p>\n The Iran war\u2019s choke-hold on energy markets has drawn parallels with Russia\u2019s war on Ukraine. But experts say that conditions in the UK economy today are vastly different to those of early 2022, when the labour market was historically tight and the Bank of England\u2019s central interest rate was close to the lowest it has ever been.<\/a><\/p>\n The scarring from the energy shock that followed the invasion has caused investors and markets to misinterpret the current crisis, Wishart wrote, which will not lead to the same degree of persistent inflation.<\/p>\n \u201cThe rise in UK interest rate expectations could harm growth as much as the energy price shock itself,\u201d he said. \u201cFresh memories of 2022-23 have caused investors to overestimate the likelihood that increases in energy prices trigger a new wage price spiral, in our view.\u201d<\/p>\n Separately, JP Morgan echoed Berenberg\u2019s claim that the UK\u2019s resilience to the Iran war has been bolstered by the government\u2019s tighter grip on the public finances. <\/p>\n In a note titled \u2018Bronze isn\u2019t bad\u2019, the American investment bank said the UK\u2019s stock market is the third best performing of comparable bourses, outstripping gains posted by Australia, the US and Germany.<\/p>\n \t\t\t\t\tRead more<\/p>\n