While the UK does not rely on Russian gas imports the country must still contend with a lack of storage capacity, surging commercial prices and a general reluctance to impose cost-saving measures. The Russian invasion of Ukraine will continue to stand front and centre of European politics going into 2023. Mass displacement, economic malaise and bloody conflict opened the year in Europe with the Russian attack and these will all continue as both sides settle into their trenches ahead of further offensive and counter-offensive operations against each other during the winter. 

Initial projections at the start of the conflict in February suggested serious energy supply shortfalls for all European importers during the winter. But following a continent-wide buying spree, gas prices have declined and are projected to continue to decline. Most European countries have filled sufficient storage capacity for the winter, which is also now forecast to be relatively mild rather than severe.

Russia’s energy blackmail opportunities have been reduced as a result but fuel shortages are still likely to take place. Changes in domestic political coalitions, most notably in Italy, Bulgaria and Sweden, and new threats by the Russian government to escalate the conflict risk further complicating European unity and support for Ukraine. Russia’s increasingly unsubtle nuclear threats will also play a part, though for now, the impact of these threats has publicly stiffened European resolve.

“Russia’s energy blackmail opportunities have been reduced but fuel shortages are still likely to take place”

The past two years have been characterised by large anti-government protests, first over Covid-19 lockdowns then expanding to economic and social issues more generally, across Europe. These will continue to be organised by a potent combination of anti-austerity movements and pro-Russia groups piggybacking along, hoping to link inflation and cost-of-living issues to the war in Ukraine. Such sentiments, though, were and will remain largely absent among the countries of Eastern and Central Europe, such as Poland, Estonia, Latvia and Lithuania, due to their long history of conflict with Russia, and the UK, which is set to continue maintaining significant support to Ukraine regardless of the expense as it is insulated from the immediate impact of the war due to distance. Such European support may prove all the more essential if, in the US, the November elections return a divided government that fails to pass legislation to provide timely support to Ukraine. 

For the UK, the ascension of a new king marks a major psychological break with the past; the future of the monarchy feels more in question than ever before as the comfortable familiarity of the late Queen Elizabeth II’s 70-year reign fades from view. More and more countries have announced plans to leave the Commonwealth in recent years, a trend expected to continue, and political and demographic changes in Scotland and Northern Ireland will also continue to flare up as a result of pro-EU, anti-Brexit sentiments in these regions.

This break with the past also comes heading into a period of further political and economic flux, with still-unresolved Brexit issues over labour shortages, food imports and trade deals. And while the UK does not rely on Russian gas imports, the country must still contend with a lack of storage capacity, surging commercial prices and a general reluctance to impose cost-saving measures as the European Union (EU) has done to try to reduce demand this winter. 

“The future of the monarchy feels more in question than ever before as the comfortable familiarity of the late Queen Elizabeth II’s 70-year reign fades from view”

The ruling Conservative Party’s recent leadership change, from Boris Johnson to Liz Truss, has not been met with widespread public approval. Polling and by-election victories by Labour and Liberal Democratic candidates preceding the next general election show a growing appetite for change after 12 years of uninterrupted Conservative rule. All of these issues will only come to a head in the months and years to come, however, but the possibility of an energy affordability crisis is the most urgent as the fall begins, and planning has begun to increase cost-of-living payments to head off the issue. 

Lastly, industrial action and travel delays have become routine in most of Europe and the UK is no exception to this, with frequent rail strikes threatening to regularly paralyse train services. Postal and nursing strikes also remain on the table going into 2023 as inflation and pay cuts show few signs of improving, with the former rising much higher and faster in the UK than elsewhere in Europe. While forecast declines in inflation from next year may reduce the impact, these issues will remain and so will the strikes and protests.

riskline.com

Geopolitical and Climate Event Forecast Report