2022: an economic and political year review

January 

2022 kicked off with the warmest New Year’s Day ever recorded in the UK. But temperatures weren’t the only thing unusually hot in January. Less than three weeks later UK inflation hit 5.4 per cent – a 30-year high. This proved the start of one of the year’s main themes, and one that promises to stick around for some time yet. 

On a more positive note, with the government's Plan B Covid restrictions in England coming to an end, we said goodbye to facemasks and Covid passes. 

February 

World events took a depressing turn in February after Vladimir Putin’s Russia invaded the Ukraine, leading to the tragic loss of many innocent lives. In response to Russia’s actions, the UK government announced a series of trade sanctions on the country. 

The impact of this war is still being felt around the globe today as it triggered a sharp uptick in oil, food and utility prices,

With inflation forecast to rise even higher as a result, the Bank of England (BoE) upped interest rates from 0.25 per cent to 0.50 per cent. 

Elsewhere, the weather again grabbed the headlines but for different reasons. Three storms – Dudley, Eunice and Franklin - hit the UK in the space of a week. The impact was severe, causing disruption to travel and business, while four people lost their lives. 

March 

The third month of 2022 saw a further 0.25 percentage points increase to interest rates as the cost of living crisis started to bite.  

Alongside this, stock markets saw increased volatility. Despite starting March at just over 7,300 points, the FTSE100 had dropped below 7,000 just a week later before closing the month at over 7,500 points. 

A similar pattern was seen across the pond. Despite falling sharply earlier in the month, the S&P 500 closed higher than it started March but has traded lower ever since.. at the time of writing, anyway. 

Budgets proved a recurring theme throughout 2022 - the first of these was held on 23 March. Then-chancellor Rishi Sunak delivered his Spring Statement, with proposed increases to national insurance (NI) among the headline measures. 

April 

April started with warnings from BoE governor Andrew Bailey that the UK was facing its harshest period for energy prices since the 1970s. The energy price cap rose a whopping 54 per cent to £1,971 for the typical household. 

Meanwhile, the above mentioned 1.25 percentage point national insurance rise came into effect adding further cost pressures to both workers and businesses. 

On the political front, then-prime minister Boris Johnson, and Sunak, were both hit with fixed penalty notices for breaking lockdown rules. 

May 

It was a bad month for Bitcoin as the digital currency’s price tanked more than 20 per cent to sit below 23,000 points – a remarkable change of fortunes after hitting 48,000 in November 2021, an all-time high. And things continued to get worse for Bitcoin as the year panned out.

In contrast, brent crude oil rose above $120 (£99.47) a barrel during the month, pushing up the price of fuel and tightening the squeeze on household finances. 

In spite of the growing economic challenges facing the UK, unemployment dropped to its lowest level for almost 50 years. For the first time since records began there were more job vacancies than unemployed people. 

June 

The month kicked off in celebratory fashion with Queen Elizabeth II’s Platinum Jubilee.  

However, thousands of holidaymakers were in less jubilant mood due to disruptions at airports which caused hundreds of flights to be either delayed or cancelled.  

Other talking points during June included the first evidence of the UK heading towards recession. Figures published by the Office for National Statistics showed the economy shrank 0.3 per cent during April after declining 0.1 per cent the month before. 

Elsewhere, interest rates continued their upwards march, hitting 1.25 per cent in June – the fifth successive time rates had risen since December 2021. 

July 

On 7 July, Boris Johnson lost the support of his fellow MPs and announced his resignation as Conservative Party leader, sparking a leadership election. Sunak, Jeremy Hunt and Liz Truss all threw their hats into the ring. 

Later on in the month, temperature records were smashed as the UK hit 40C for the first time, making July 19 the hottest day ever. While many welcomed the sweltering heat, it exacerbated concerns about the effect of climate change. 

In more positive news, the NI threshold increased on 6 July from £9,880 to £12,570, lifting more than two million workers out of paying the tax. 

And on the final day of July, England women’s football team were crowned champions of Europe after beating Germany 2-1 after extra time at Wembley stadium. 

August 

Inflation continued to climb sharply during the eighth month of the year. In mid-August it was announced UK CPI had reached double digits – a 40-year high. 

In an effort to curb price rises, the BoE increased the base rate 0.50 percentage points to 1.75 per cent, the largest single interest rate hike in 27 years, 

Further pressure on the worsening cost of living surfaced later in the month. Ofcom announced the price cap for a typical household’s energy bills will rise 80 per cent from £1,971 to £3,549, prompting calls from industry experts such as Martin Lewis for the government to intervene. 

September  

The ninth month of 2022 will be remembered for the passing of Queen Elizabeth II, the UK’s longest ever serving monarch, who died peacefully at Balmoral aged 96. 

Her funeral was held on 19 September, with around 250,000 mourners queuing for up to 14 hours to see the coffin at Westminster Hall. 

At 73 years old, King Charles became the oldest monarch to assume the British throne. 

The start of the month saw a significant political development as Liz Truss fought off competition from several other candidates to secure the role of PM. 

Her premiership, however, got off to a disastrous start. The unfunded tax cuts proposed in new chancellor Kwasi Kwarteng’s emergency mini-Budget, held on 23 September, sparked turmoil in markets. 

The pound dropped to its lowest level against the dollar since 1985, and mortgage lenders pulled hundreds of products from the market in fear of the economic repercussions. 

October  

After just 45 days in the role, Truss resigned, becoming the shortest serving prime minister in British history. Kwarteng’s stint was even shorter. He was relieved of his duties a week earlier. 

New chancellor Jeremy Hunt wasted little time making his mark, immediately reversing most of the tax cuts proposed within his predecessor’s mini-Budget. Later in the month, Sunak became Britain’s youngest ever PM after rival Penny Mordaunt ducked out of the leadership race at the eleventh hour. 

November 

2022’s penultimate month kicked off with the largest interest rate hike since 1989 – the UK’s base rate increased 0.75 percentage points to 3 per cent. Upon announcing the move, the BoE said the UK was staring down the barrel of its longest recession since records began. 

Some economic fears were alleviated later on in the month as Jeremy Hunt unveiled his Autumn Statement. In stark contrast to Kwarteng, tax rises proved the weapon of choice, namely stealth grabs by freezing thresholds across the board. Hunt also reduced allowances to both capital gains tax and dividend tax. 

On the sporting front, on 13 November England men’s cricket team were crowned T20 World champions, fending off Sri Lanka in the final. A week later, the men’s football World Cup kicked off in Qatar. 

December  

While it’s too early to look back on December, most will be hoping political and economic developments will stay off the front pages during the festive period. 

Looking ahead, when the BoE’s Monetary Policy Committee meets again on 15 December further interest rises are a strong possibility. 

What’s less likely is England winning the men’s football world cup. But in a year characterised by the unexpected, it wouldn't be strangest thing to happen in 2022.