search
date/time
 | Lancashire Times A Voice of the Free Press |
9:05 AM 18th May 2022
business
Eye Watering Surge In Inflation Raising Prspect Of Recession
Head of Economics at the BCC, Suren Thiru, said:
“The jump in UK inflation in April is eye-watering and underscores the growing cost-of-living crisis facing households and the damaging squeeze on firms' ability to invest and operate at full capacity.
“The marked acceleration in the headline rate in April reflected the continued upward pressure on prices from surging energy and commodity costs, as well as the energy price cap rise and the reversal of the VAT reduction for hospitality in the month.
“The scale at which inflation is damaging key drivers of UK output, including consumer spending and business investment, is unprecedented and means there is a real chance the UK will be in recession by the third quarter of the year.
“While inflation may moderate a little over the summer, April’s inflationary surge is likely be surpassed in October as the expected energy price cap rise in the month lifts inflation above 10%.
“Soaring inflation means that a June interest rate rise is inevitable. However, higher interest rates will do little to address the global factors driving this inflationary surge and risks undermining confidence and aggravating the financial squeeze on consumers and businesses.
“Although surging global energy and commodity prices aren’t typically something in the UK government’s direct control, more needs to be done to help consumers and businesses through this difficult period. This should include reversing the rise in National Insurance Contributions and cutting VAT on business energy bills to 5%.”
“The jump in UK inflation in April is eye-watering and underscores the growing cost-of-living crisis facing households and the damaging squeeze on firms' ability to invest and operate at full capacity.
“The marked acceleration in the headline rate in April reflected the continued upward pressure on prices from surging energy and commodity costs, as well as the energy price cap rise and the reversal of the VAT reduction for hospitality in the month.
“The scale at which inflation is damaging key drivers of UK output, including consumer spending and business investment, is unprecedented and means there is a real chance the UK will be in recession by the third quarter of the year.
“While inflation may moderate a little over the summer, April’s inflationary surge is likely be surpassed in October as the expected energy price cap rise in the month lifts inflation above 10%.
“Soaring inflation means that a June interest rate rise is inevitable. However, higher interest rates will do little to address the global factors driving this inflationary surge and risks undermining confidence and aggravating the financial squeeze on consumers and businesses.
“Although surging global energy and commodity prices aren’t typically something in the UK government’s direct control, more needs to be done to help consumers and businesses through this difficult period. This should include reversing the rise in National Insurance Contributions and cutting VAT on business energy bills to 5%.”
Kitty Ussher, Chief Economist at the Institute of Directors, said:
“While this high rate was to be expected given the rise in the retail energy price cap, it is nevertheless shockingly high.
“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.
“If the Chancellor intends to intervene in advance of the further price cap rise in the autumn, he should make that clear, to start bringing expectations of future inflation back down.”
TUC General Secretary Frances O’Grady said:
“Conservative MPs keep telling families there is no cost of living crisis – it’s their own fault for not working more hours or having the wrong diet. But with inflation so high, the crisis is cold, hard reality. And families are desperate for the government to help with an emergency budget.
“The pandemic showed that the government can act to help business and workers if they want to. The Chancellor must step up with an emergency budget that helps families with a boost to universal credit and the minimum wage. And we urgently need a windfall tax on oil and gas to fund energy grants for struggling households.”
“Conservative MPs keep telling families there is no cost of living crisis – it’s their own fault for not working more hours or having the wrong diet. But with inflation so high, the crisis is cold, hard reality. And families are desperate for the government to help with an emergency budget.
“The pandemic showed that the government can act to help business and workers if they want to. The Chancellor must step up with an emergency budget that helps families with a boost to universal credit and the minimum wage. And we urgently need a windfall tax on oil and gas to fund energy grants for struggling households.”
Rain Newton-Smith, CBI Chief Economist, said:
“Inflation was always likely to hit hard in April given the energy price cap increase. Looking ahead, inflation is likely to stay high, with a resulting historic squeeze in households’ incomes and a tough trading environment for businesses.
“It is critical the government explores options to help people facing real hardship now, and support cashflow for vulnerable firms. Stimulating business investment is also crucial, to both plug the near-term gap in growth and to shore up the economy’s potential to withstand future shocks. Turning good intentions on a permanent investment deduction into a firm commitment, setting out an infrastructure roadmap and publishing a digital strategy are steps which can be taken without delay.”