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Rampant inflation hits a 40-year high

·3-min read
A customer (R) pays passes a stallholder a five pound note to pay for their fruit and vegetables at Walthamstow Market in east London on November 21, 2021. - TOLGA AKMEN/ AFP
A customer (R) pays passes a stallholder a five pound note to pay for their fruit and vegetables at Walthamstow Market in east London on November 21, 2021. - TOLGA AKMEN/ AFP

Inflation has surged to a 40-year high of 9pc as Britain battles a cost of living crisis driven by rising food and energy bills.

Electricity bills were up by more than half in April compared with the same time a year ago following a jump in the price cap, the Office for National Statistics said, with gas up more than 95pc.

Drivers have also been hammered, with petrol up by almost 29pc and diesel up more than a third. Second-hand cars prices have climbed more than a quarter as customers look for a used vehicle because of a massive shortage of new ones.

Food prices are up 6.7pc on the year, the highest increase since 2011, amid warnings from the Bank of England of “apocalyptic” shortages across the world caused by the war in Ukraine.

Bread is up more than 6pc, flour more than 9pc and pasta more than 10pc.

Price rises are expected to hit double digits in the coming months, with petrol and diesel at new records and Russia’s war in Ukraine disrupting supplies of staples including wheat and cooking oils.

Economists warned that Britain risks recession as a result of the combination of rising prices and tax increases imposed by Rishi Sunak, the Chancellor, as well as interest rate increases imposed by the Bank of England in an effort to bring inflation under control.

Thomas Pugh, at RSM, said rising prices mean the economy will completely grind to a halt by the end of the year.

He said: “While we aren’t forecasting a recession at the minute, it would not take much of a rise in oil prices or a disruption in supply chains to push the UK into one."

Kitty Ussher, chief economist at the Institute of Directors, said inflation is “shockingly high”, undermining business investment and harming future economic growth.

She said: “Business leaders tell us that the UK macroeconomy is now their number one negative issue, driven by worries over inflation.

“As a result, firms are becoming more reluctant to invest, storing up problems for the economy in future.”

The older retail prices index measure of inflation - the July reading of which will be used to set increases for rail season tickets - rose by 11.1pc.

Pressure is mounting on low-income families in particular. Rising prices in April gobbled up one-eighth of the cash which the least affluent households have left to spend on non-essential items, according to Retail Economics, amounting to a £59 blow in the month.

As inflation is focused on basics including energy and food, which make up a larger share of spending for those with little money, inflation is already running at almost 11pc for the poorest tenth of households, according to the Institute for Fiscal Studies.

For the highest-earnings 10pc, the rate is a still-painful 7.9pc.

Heidi Karjalainen, economist at the IFS, said the situation is set to get worse.

"Continuing pressures, such as the war in Ukraine, are likely to push Ofgem’s October tariff cap, as well as other prices including food prices, even higher later this year,” she said.

“We are likely to be in a prolonged period during which poorer households are facing rates of inflation even higher than the headline figures would suggest."

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