The UK’s consumer prices index (CPI) shows inflation reached 9%, up from 7% in March 2022
The rate is the highest level seen in the last 40 years with the consumer prices index rising by 9.0% in the 12 months to April 2022. The recent 2% rise was also the sharpest monthly increase since 1980.
The Office for National Statistics (ONS) stated that the 54% increase in the energy price cap in April, which took the average annual gas and electricity bill close to £2,000, was the main reason for the jump in the consumer prices index.
Higher fuel and food prices, driven by the Ukraine war, also pushed up the cost of living up, with inflation expected to continue to rise this year. The ONS also noted that the end of the temporary cut in VAT for hospitality venues, from 12.5% back to the original 20%, has also contributed to the rise.
In his official response to the figures, the Chancellor Rishi Sunak said: ‘Countries around the world are dealing with rising inflation. Today’s inflation numbers are driven by the energy price cap rise in April, which in turn is driven by higher global energy prices.
‘We cannot protect people completely from these global challenges but are providing significant support where we can and stand ready to take further action.
‘We’re saving the average worker £330 a year through reducing National Insurance contributions (NIC), changing Universal Credit to save over a million families around £1,000 a year, and providing millions of families with £350 each this year to help with their energy bills.’
There has been increased criticism of the government over their ‘lack of action’ to combat the rise of inflation as those who will be hit hardest are lower to middle-income households.
Analysis from the Resolution Foundation found that inflation actually sits at around 10.2% for the poorest tenth of households with the richest tenth having an inflation rate of around 8.7%.
The foundation stated that this is since lower-income households spend a greater share of their family budgets on energy bills where prices are rising sharply.
Azets stated that the current level of inflation is to hit businesses hard as reduced discretionary spending is likely to increase intensely as finances are squeezed.
Donald Boyd, head of growth, Azets, said: ‘My message to businesses is to be brave and have upfront conversations with customers to increase prices to absorb rising costs however, any price rise is far less forgiving in the B2C sector, where retail and hospitality in particular will be first impacted.
‘Whilst it is of little comfort to SMEs and the public, much of the inflationary pressures are resulting from higher household energy prices and fuel costs rather than anything fundamentally unsound in the economy. It may be a case of holding our nerve until inflation peaks at around 10% or above before starting to fall next year.’
The Bank of England (BoE) warned earlier this month that inflation is to leave the UK on the ‘brink of recession’ with expectations that it will peak at over 10% later this year with the further expected rise in the Ofgem’s energy tariff in October.
In a Treasury Committee meeting on Monday, the Bank of England’s chief Andrew Bailey said that the bank was ‘helpless’ when it came to rising inflation as 80% of it was caused by factors that it could not control.
In the UK, inflation spiked from 9.2% in September 1973 to 12.9% in March 1974. Inflation peaked at 24.2% in 1975 and unemployment also climbed sharply.
The knock-on effects of this included the government being forced to ration electricity, frequent power cuts, and an enforced three-day working week.