UK 'well placed' to deal with crisis - Minister

The UK is facing “a very testing period” because of the global economic crisis but is “well placed” to withstand the consequent challenges, the Government said.

The UK is facing “a very testing period” because of the global economic crisis but is “well placed” to withstand the consequent challenges, the British government said.

Junior business minister Baroness Vadera made the comments as a business leader warned that companies are being pushed to the “absolute edge” by rocketing oil prices.

British Chambers of Commerce policy head Chris Hannant called for urgent action after crude reached its latest record of 135.09 US dollars a barrel on commodity markets.

Prices have since slipped back, but oil is still more than a third more expensive than at the start of the year and around double the cost 12 months ago.

Baroness Vadera told peers: “We are facing a very testing period in the economy. It is the first real economic crisis of globalisation. With a small start in Texas, the global credit crunch is combining with international prices, and this is also impacting on food prices.

“We are facing a rather uncomfortable situation caused by the global liquidity squeeze still being worked through in the US, and rising world commodity prices, but I strongly believe that the UK is relatively well placed to face these challenges.”

This year’s relentless rises amid global supply fears have piled pressure on motorists, who yesterday faced the highest monthly rise in average diesel prices this century, as well as business, many of which rely on oil for raw materials.

Mr Hannant joined growing calls for Chancellor Alistair Darling to scrap this autumn’s proposed 2p rise on fuel duty.

He said: “Oil prices hitting new highs of 135 dollars a barrel is pushing businesses to the absolute edge.

“Something needs to be urgently done or increasing numbers of companies will be left with no choice but to pass extra costs onto customers.

“Sending a positive message to business would make a huge difference and the Government should start by announcing that they are scrapping the next 2p hike in fuel duty.

“The Treasury is already receiving a massive windfall from above expectation oil prices, which makes any extra fuel levy totally unjustifiable.”

Mr Hannant’s warning came as figures yesterday showed a record number of manufacturing firms were expecting to put prices up in the coming months as a result of oil price rise pressure.

Forecourt data from the AA showed UK drivers were yesterday paying an average of 113.98p per litre of unleaded petrol, up 18% from a year ago, and 126.35p for diesel, making it 30% more expensive than a year ago.

The motoring organisation said a five dollar leap in the price of oil will add potentially another 2.5p to petrol prices and take a month to work its way through to the pump.

It’s president Edmund King said: “The threat of even higher prices in the pipeline will perch like a vulture above UK forecourts waiting to pick an even bigger hole in the pocket of drivers and consumers.”

Yesterday’s oil price spike came amid continued supply worries, particularly in the US, rising global demand from India and China and a slumping dollar.

Its steep rise has put the Bank of England’s efforts to control inflation under pressure.

Governor Mervyn King warned last week that inflation could spike as high as 3.7% later this year – nearly double its 2% target – on the soaring oil prices, at a time when food and other household bills are on the rise.

The inflation pressure means the Bank’s ability to help the economy through lower interest rates is limited.

Energy Minister Malcolm Wicks said the Government was being “very active” in talking to oil-producing nations to help ease spiralling prices.

But he also suggested the dramatic hike could concentrate the minds of people on the need for energy efficiency and make them take the subject “more seriously”.

Chief executive of oil giant Royal Dutch Shell, Jeroen van der Veer, defended his firm’s near-£14 billion profit haul last year.

He told Sky News: “We invest about a similar amount in new supplies for the future. That is what is necessary to fulfil all this demand.”