The jump in UK inflation in April, revealed in just-published figures from the Office for National Statistics, is eye-watering and underscores the damaging squeeze on firms’ ability to invest and operate at full capacity, says the British Chamber of Commerce.
Head of Economics at the BCC is Suren Thiru. He said:“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%.”
