1. Introduction
Each country aims at managing overall economic position which aids in driving progress, enhancing living standard and developing job opportunities. War implies for the conflict between forces of arms, nations and parties due to the economic, religious, political, civil, territorial and ideological reasons. Wars have created long lasting impact on the overall economic position of the country by hampering the infrastructural and logistics. It has been identified that war leads reduction in the economic output on an average of 30% and rise inflation by over 15% (War Impact of Economy, 2024). Ukraine and Russia war was started in the year of 2014 when Russia occupied Crimea from Ukraine and supported pro-Russia separatists. (Ukraine-Russia War, 2023) In February 2022, Russia has started occupying other areas of Ukraine’s by launching full scale invasion. This war has resulted in creating huge amount of negative impact on economic and financial position of the countries. The current report is based on defining the impact of Russia and Ukraine war on overall economic position of UK. The report will also discuss on various strategies by which government could overcome challenges and support in enhancing overall economic condition of UK.
2. Discussion And Analysis
2.1 Economic Impact of war on UK
2.1.1 Rise of oil prices
The major economic impact caused by Russia-Ukraine war is related to rise in the crude oil prices across the globe. Russia is the second largest natural gas and oil producer within the world and its war with Ukraine’s has placed severe negative impact on the energy market. In March 2022, Brent crude oil price touched £133.130 barrel and crude Oil future accounted for £133.460 barrel which was the highest price since July 2008 (Impact of Ukraine-Russia war on Oil prices, 2024). This war has resulted into increasing UK’s gas prices by 40% which ultimately impacts the country’s overall economic position. UK is not self sufficient in producing oil due to which it imports large amount of oil from Norway, Algeria, Libya and Nigeria (Lipsey and Chrystal, 2015). After the war, UK has stooped sourcing Crude oil directly from Russia but indirectly it is having long lasting impact on the oil prices across the globe. Further, Russia has also restricted various seaborne routes due to which UK is importing oil through long distances that increases the overall cost of transportation.
This increase in transportation cost leads to rising overall crude oil cost for UK that ultimately creates inflationary situation within the country. Along with this, it has been identified that due to banning imports from Russia, UK needs to incur 60% higher cost than before which amounted to 19.3 billion pound that places negative impact on the country’s economic position (Rise in Price of UK’s oil,. 2024). Thus, incline in the price of crude oil is positively related with the cost of it’s by- product such as petrol, diesel, cooking oils, paints and tyres. Gas and oil industry is the backbone of trading and any increase in the prices of oils has trigger inflation within the economy (Mbah and Wasum, 2022). An increase in the crude oil has resulted into increasing electricity bills by 10% which could not be effectively afforded by the large section of the society. Along with this, rise in the crude oil price has lead to rising overall cost of transportation which eventually ends up increasing overall cost of all the product and services within country. Moreover, this conflict has also triggered fear of shortfall in crude oil supplies that eventually adversely impact the overall GDP growth rate.
2.1.2 Rise in prices of stable cost
Another significant negative impact of Russia-Ukraine war is related to the increasing overall food prices within UK. It has been identified that after Russia invasion of Ukraine there was 10.6% increase in UK’s stable food prices which creates affordability issue for the local people. It has been identified that there was 5.7% increase in the inflation rate as Ukraine’s continue to drive cost of stable food such as tinned tomatoes and margarine. Further, the prices of pasta has also boosted by 8.6% which was the highest cost in the last few years (Impact of Ukraine –Russia war on Food price, 2025). This situation has occurred as UK was involved towards imported various dairy items and food grain from Ukraine (Qureshi et al, 2022). It has been depicted that there is 29% reduction in the Ukraine’s grain production which ultimately leads to increasing overall food prices. Before war, Ukraine used Seaborne trade for exporting its 90% of product but after this Russia military has blocked various Sea Ports that create an issue in the transportation.
Due to this reason Ukraine has transported its goods through other modes that increase the prices of food items and ultimate results in creating affordability issues for the country’s people. Further, an increase in the cost of petrol and diesel has negatively impacted the international trade of UK which leads to increasing overall food prices (Tank and Ospanova, 2022). This rise in the food prices leads inflationary situation that negatively impacts the overall economic condition. It has been identified that food insecurity issues have increased by 3% after 2023 within UK (Food insecurity in UK, 2024). Food insecurity is having long term impact on the country’s economy as it stunt physical development, waste money, shrinks productivity and hampers overall educational outcome. It has been identified that food insecurity has also leads to increasing mental and physical health issues within population that impact on their overall productivity and thereby economic position.
2.1.3 Disruption in supply chain process of business entities
Lastly, the major issue caused by Ukraine-Russia war is related to the disruption of overall supply chain of the business entities that eventually impacts the country’s economic position. UK is having high dependence over Russia and Ukraine for the variety of resources, However, war has placed significant impact on the overall supply chain management of the country (Tong, 2024). The war has lead to blocking large number of logistics network that creates issue in easily sourcing all the required materials. It has been identified that there is a rise in UK’s production cost due to the raw material shortage and global supply chain issues. This situation has arrived as Russia has blocked Black sea route due to which 45 ship were unable to leave ports that restrict country to export 70 million tons of goods (Disruption in supply chain process Due to Ukraine-Russia war, 2024).
Due to this reason, UK was unable to get access to all the required material that impact on the overall working of business entity. It has been identified that war has created huge disruption in export and import of energy, oil, metal and other commodities which in turn adversely impacted the UK’s economy. Various industry of auto parts are shut down due to facing obstacle in souring required materials easily such as steel and palladium which ultimately impacts the country’s economic status (Dyson et al, 2023). Moreover, there was an increase in UK’s inflation rate due to high food and energy prices which creates issue for the business to maintain its stability. This situation has given rise to hoarding as many suppliers in UK have accumulated essential goods and sell them at higher prices. Ultimately, this increases the cost of final goods and services.
Along with this, war has resulted in causing severe infrastructure damage which hinders the movement of finished goods and impacts overall import and export of the organization. This disruption leads to increasing security risk that ultimately increases the cost and timelines leading to developing obstacle in timely supplying goods to the customers (Shah and Gedamkar, 2022). Beside this, supply chain disruption has increased overall manufacturing cost of the business entities which ultimately increases the product prices. According to the law of demand, high prices will lead reduction in the demand due to which firm faces difficulty in gaining the required profits. This also reduces manufacturer’s motivation to produce more leading to reducing overall GDP and negatively impacting on overall economic position of the UK.
2.2. Recommendations to government for managing challenges
2.2.1. Reduction of Oil taxes
The major impact caused by the Ukraine-Russia war is related to the increasing overall crude oil prices within UK. This situation needs to be managed as it is negatively impacting the transportation, household and other business of the country. To overcome the issue, UK’s government should focus on reducing the tax rate which will help in decreasing the cost for businesses and household. Currently, government charges 35% tax on the oil which ultimately creates affordability issues for the larger market. This reduction in tax rate will help in reducing the overall transportation cost, aids in sourcing goods at reasonable prices which ultimately result into reduction in the cost of product for the customers. Moreover, this reduction will also lead decline in the energy bill which further contributes towards managing overall cost of living (Gaio et al, 2022). This also together helps in reducing the overall inflation rate that leads improvement in the overall economic position of the country. Reduction in inflation will assist in boosting purchasing power of the consumer, support in enhancing productivity, develops employment opportunities which ultimately result into higher economic growth and development.
2.2.2. Government setting up price ceiling:
Another most significant strategy for mitigating negative impact of war is price ceiling. It has been identified that Ukraine-Russia war resulted into high prices for all the stable food and increases the scope of hoarding which further reduces the overall purchasing power of the population. To overcome this situation, government should use price ceiling strategy which restricts sellers to charge cost higher than particular limits (Ahmed, Hasan and Kamal, 2023). This situation will help in reducing food insecurity within UK that aids in stabilizing prices within economy and managing overall inflation. This will help in managing the consumer’s purchasing power, boost productivity and ultimately contributes towards overall economic development of UK. Price ceiling should be used only for necessity good as this will result in causing deadweight loss that ultimately impact on country’s economy.
2.2.3 Government subsidies:
It has been identified that war has created huge amount of supply chain disruption that eventually impacts the overall manufacturing cost. This disruption has also resulted into reduction in the overall GDP which negatively impacts the country’s economy. To overcome the same, government should involve towards offering subsidies which will reduce the cost burden on manufacturer and motivate them to produce more (Benton et al, 2022). This will help in increasing overall production capacity of the country leading to higher GDP and ultimately results in boosting economy. However, an equitable amount of subsides should be set up as irrelevant subsidies will result in causing deficit in government budget that eventually reduces overall economic condition of UK.
Conclusion
By summing up the report, it has been identified that Ukraine- Russia war has created long lasting economic problem on UK. It has been determined that war has resulted in boosting overall crude oil prices which leads to developing inflationary situation within UK. Country has decided not to maintain trade relation with Russia due to which it needs to import oil from other countries that increases overall cost. This rise in oil prices has resulted in increasing cost of transportation, cooking and electivity bill leading to negatively impacting on economic condition. Moreover, Russia has damaged Ukraine’s agricultural land and blocks various seaports which create issue in easily sourcing food item from Ukraine. This leads to create food insecurity within UK leading to increasing health issue, reduces productivity and eventually impact on overall economic position. Moreover, the war has increased supply chain disruption within UK which eventually increases manufacturing cost of the organisation and ultimately reduces overall purchasing power of customers. To overcome all the situation, government should involve towards reducing oil tax rate which leads to decreasing cost of transportation and cost of living. Along with this, focus should be paid over offering subsidies which aids in reducing manufacturing cots. Moreover, government should also concentrate over setting up price ceiling that assist in managing inflationary situation.
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Refrences
Books and Journals
Ahmed, S., Hasan, M.M. and Kamal, M.R., 2023. Russia–Ukraine crisis: The effects on the European stock market. European Financial Management, 29(4), pp.1078-1118.
Benton, T.G., Froggatt, A., Wellesley, L., Grafham, O., King, R., Morisetti, N., Nixey, J. and Schröder, P., 2022. The Ukraine war and threats to food and energy security. Chatham House—International Affairs Think Tank, 4, pp.1-46.
Demir, S., 2022. The 2022 Russia-Ukraine war: reasons and impacts. Bölgesel Araştırmalar Dergisi, 6(1), pp.13-40.
Dyson, E., Helbig, R., Avermaete, T., Halliwell, K., Calder, P.C., Brown, L.R., Ingram, J., Popping, B., Verhagen, H., Boobis, A.R. and Guelinckx, I., 2023. Impacts of the Ukraine–Russia conflict on the global food supply chain and building future resilience. EuroChoices, 22(1), pp.14-19.
Gaio, L.E., Stefanelli, N.O., Júnior, T.P., Bonacim, C.A.G. and Gatsios, R.C., 2022. The impact of the Russia-Ukraine conflict on market efficiency: Evidence for the developed stock market. Finance Research Letters, 50, p.103302.
Lipsey, R. and Chrystal, A. (2015) Economics 13th edn OUP Oxford
Mbah, R.E. and Wasum, D.F., 2022. Russian-Ukraine 2022 War: A review of the economic impact of Russian-Ukraine crisis on the USA, UK, Canada, and Europe. Advances in Social Sciences Research Journal, 9(3), pp.144-153.
Qureshi, A., Rizwan, M.S., Ahmad, G. and Ashraf, D., 2022. Russia–Ukraine war and systemic risk: who is taking the heat?. Finance Research Letters, 48, p.103036.
Shah, P. and Gedamkar, P.P., 2022. Effects of Russia-Ukraine war. Interantional Journal of Scientific Research in Engineering and Management, 6(03), pp.1-5.
Tank, A. and Ospanova, A., 2022. Economic impact of Russia-Ukraine war. International Journal of Innovative Research in Science Engineering and Technology, 11(4), pp.3345-3349.
Tong, E., 2024. Repercussions of the Russia–Ukraine war. International Review of Economics & Finance, 89, pp.366-390.
Online
Disruption in supply chain process Due to Ukraine-Russia war. 2024. Online. Available through: < https://gmk.center/en/posts/how-the-russia-ukraine-war-has-impacted-on-logistics-routes-and-supply-chains/#:~:text=The%20war%20in%20Ukraine%20also,annually%2C%20as%20before%20the%20war.>
Food insecurity in UK. 2024. Online. Available through: < https://commonslibrary.parliament.uk/research-briefings/cbp-9209/ >
Impact of Ukraine –Russia war on Food price. 2025. Online. Available through: < https://www.csis.org/analysis/russia-ukraine-and-global-food-security-two-year-assessment#:~:text=Because%20of%20Russia's%20invasion%20of,lowest%20level%20in%20three%20years.>
Impact of Ukraine-Russia war on Oil prices. 2024. Online. Available through: < https://www.weforum.org/stories/2022/03/how-does-the-war-in-ukraine-affect-oil-prices/>
Rise in Price of UK’s oil. 2024. Online. Available through: < https://www.globalwitness.org/en/press-releases/ukraine-war-third-anniversary-record-oil-profits-and-dash-for-critical-minerals-amid-conflict/#:~:text=The%20UK's%20energy%20bills%20remain,more%20protection%20for%20bill%2Dpayers.>
Ukraine-Russia War. 2023. Online. Available through: < https://www.bbc.com/news/war-in-ukraine >
War Impact of Economy. 2024. Online. Available through: < https://www.ifw-kiel.de/publications/news/economic-fallout-the-price-of-war/#:~:text=Wars%20often%20cause%20immense%20economic,percentage%20points%20over%20five%20years.>
