UK inflation hits 40-year high of 9% after energy bills soared – business live


The FT’s Chris Giles points out that the UK now has the highest inflation rate among G7 countries, and among the highest of any advanced economy in the world.

Rowena Mason

Rowena Mason

Liz Truss, the foreign secretary, acknowledged it was a “very, very difficult situation that families face” in the face of a “severe global economic storm” but declined to say what the chancellor would do about it.

Speaking to BBC Breakfast, she said:

“This is a very, very serious global inflation spike which is having huge effects around the world.

We have made the cuts to petrol duty and the chancellor is working on what more we can do.

The important thing is getting economic growth up.”

Truss also told Sky News that Britain is facing a “very, very difficult economic situation”, but pushed back against calls for a windfall tax on energy producers, saying they should use their profits to invest more in the UK.

Foreign Secretary Liz Truss tells Sky News that BP should use their profits to invest more money in the UK, instead of the Government implementing a windfall tax

For more on this and other news visit https://t.co/NEDMP2uP6W

— Sky News Breaking (@SkyNewsBreak) May 18, 2022

The Institute of Directors says UK inflation is “shockingly high”.

Kitty Ussher, Chief Economist at the Institute of Directors, says Rishi Sunak should say if he plans to provide more help on energy bills, as is being reported today.

Ussher explains:

“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.”

The Times this morning reports that the chancellor is drawing up plans to increase the warm home discount by hundreds of pounds, before cutting taxes to help with the cost-of-living crisis.

They say:

The chancellor will take a two-pronged approach: a package to help with energy bills in July followed by general tax cuts in the autumn.

From October the warm home discount will give three million of the poorest households in England and Wales £150 off their bills. Treasury officials have drawn up a range of options, including a one-off increase of £300, £500 or even £600 to help households to cope with soaring energy prices.

CBI: Critical that government helps people facing hardship

The CBI, which represents British businesses, says it is ‘critical’ that the government helps people facing real hardship now in this ‘historic’ squeeze.

Rain Newton-Smith, CBI chief economist, said the government must also support vulnerable firms:

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.”

Shadow chancellor Rachel Reeves said the rate of inflation hitting 9% in April would be “a huge worry for families already stretched”, and urged the government to back Labour’s call for an Emergency Budget.

NEW: Inflation has risen to 9% – the highest in 40 years.

A huge worry for families already stretched.

We can’t wait any longer for action from this out of touch government.

Today, Labour force a vote for an Emergency Budget and for a plan for growth.

The Tories must back it.

— Rachel Reeves (@RachelReevesMP) May 18, 2022

Sunak: cannot protect people completely from global challenges

Rishi Sunak, who is facing growing pressure from all sides to offer more help to households, has said the government ‘can’t protect people completely’ from high inflation.

The chancellor says countries around the world were being hit by rising prices, and that the increase in regulated energy tariffs pushed up inflation in April.

“We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action.”

Chancellor repeats that he stands “ready to take further action” to support people who are suffering as a result of rampant inflation.

Many in his own party are wondering what he is waiting for.

Treasury clearly intends to do more. By delaying Sunak risks looking out of touch. pic.twitter.com/AMpYBr1j8Q

— Joel Hills (@ITVJoel) May 18, 2022

Inflation in the US was 8.3% in April, while it hit a record high of 7.5% in the eurozone — with countries around the world experiencing higher costs of energy and food.

But the longer Sunak simply ‘stands ready’, the more struggling families will suffer.

#Breaking Chancellor Rishi Sunak said “we cannot protect people completely” from global problems which contributed to inflation hitting 9% in April but we “are providing significant support where we can, and stand ready to take further action”

— PA Media (@PA) May 18, 2022

ONS: Inflation rose steeply in April

Grant Fitzner, chief economist at the Office for National Statistics (ONS), says there was a steep increase in inflation last month:

“Inflation rose steeply in April, driven by the sharp climb in electricity and gas prices as the higher price cap came into effect.

“Around three-quarters of the increase in the annual rate this month came from utility bills.

“We have also published new modelled historical estimates today which show that CPI annual inflation was last higher 40 years ago.

“Steep annual rises in the cost of metals, chemicals and crude oil also continued, along with higher prices for goods leaving factory gates.

“This was driven by increases for food products, transport equipment and metals, machinery and equipment.”

UK factories raised by prices by 14%

UK factories have hiked their prices last month, as they passed on rising costs to customers, the ONS reports.

Output prices (what firms charge at the factory gate) were 14% higher than a year ago in April, which is the highest rate since July 2008.

Input prices (what firms pay for energy, raw materials and parts) jumped by 18.6% over the last year, a record high.

That highlights the inflationary pressures in the economy, as these producer prices will feed through to consumers in the shops.

UK producer price inflation
UK producer price inflation Photograph: ONS

Inflation: the key charts

These charts highlight just how rapidly UK inflation has soared in recent months – now four times as high as the Bank of England’s 2% target.

UK inflation rates
UK inflation rates Photograph: ONS
UK inflation
UK inflation Photograph: ONS

While this chart shows the impact of lifting the energy price cap by 54% last month:

UK inflation
UK inflation Photograph: ONS

Fuel costs at record highs

Record petrol prices also pushed up the cost of living in April.

Average petrol prices were 161.8 pence per litre in April 2022, compared with 125.5 pence per litre a year earlier, and the highest on record.

Diesel averaged 176.1 pence per litre, was also the highest recorded.

As a result, motor fuels and lubricants were 31.4% more expensive than a year ago — the highest inflation rate for this category since the data series began in January 1989, driving up the cost of motoring and transporting goods.

Yesterday, the government put pressure on fuel giants to pass on the 5p per litre cut in fuel duty to customers. Business Secretary Kwasi Kwarteng wrote to the industry “to remind them of their responsibilities”:

My letter to petrol retailers this evening following concerns the Chancellor’s 5p Fuel Duty cut is not being passed on in any visible or meaningful way.

The Competition and Markets Authority is now engaged on this issue.

👇🏾 pic.twitter.com/a7ysGyvWWA

— Kwasi Kwarteng (@KwasiKwarteng) May 17, 2022

Lifting the energy price cap in April resulted in 12-month inflation rates of 53.5% for electricity and 95.5% for gas, the Office for National Statistics says.

Housing and household services, which includes energy bills, and transport costs such as motor fuels, had the largest impact on inflation.

UK inflation at 40-year high.

At 9%, the UK’s consumer prices index is the highest since it started being calculated in 1997.

The Office for National Statistics estimates that CPI hasn’t been higher since 1982.

UK inflation hit 9% in April

Newsflash: The UK’s inflation rate soared to 9% in April, as the cost of living crisis deepened and energy bills jumped.

Inflation is having a very painful impact on poorer families, charities and doctors have warned this week.

Families struggling to cope with energy bills are seeking shelter in McDonald’s, with one charity saying hard-pressed parents and children are spending their evenings in the fast food restaurants, relying on the facilities as an emergency kitchen, bathroom and living room.

“People are buying their kids a Happy Meal for a few quid and keeping them warm inside. Then they wash and brush their teeth in the sinks and watch television for hours on the free wifi,” says Matthew Cole, chair of the trustees of the Fuel Bank Foundation, a body which tries to help families with their bills.

Action for Children warned this week that hard-up families are skipping meals, wearing coats indoors to stay warm, and living in the dark because they can’t afford to switch on the lights.

And a poll commissioned by the Royal College of Physicians found that more than half of people in the UK have already seen their health deteriorate as a result of the cost of living crisis, with doctors warning some patients can no longer afford to look after themselves.

Dr Andrew Goddard, the president of the RCP, said:

“The cost of living crisis has barely begun, so the fact that one in two people is already experiencing worsening health should sound alarm bells, especially at a time when our health service is under more pressure than ever before,”

Rishi Sunak faces Tory clamour to act now on cost of living crisis

Tory MPs are piling pressure on Rishi Sunak to take decisive action to deal with the cost of living crisis with measures such as cutting VAT, increasing energy bill support and raising benefits, as inflation is forecast to top 9% on Wednesday.

A string of Conservatives from across different wings of the party called on the chancellor to intervene within weeks, amid dire economic predictions about the squeeze on households.

One senior Tory, Sir Bernard Jenkin, the chair of the liaison committee that holds the prime minister to account, will warn on Wednesday that “the economic situation is far worse than the government is prepared to admit”.

He is expected to highlight new figures obtained from the House of Commons library showing pensioners and the lowest income households face paying £1,000 more a year for food and energy, arguing that any help for them cannot “wait until the autumn”.

He will say:

“The measures that need to be looked at are £20 uplift in universal credit, transferring the cost of energy green levies to the exchequer, abolishing VAT on domestic fuel, increasing the warm homes scheme, and increasing the pensioners’ fuel allowance.”

Jenkin also backed the idea of cutting VAT overall as the present inflation and tax increases are “sucking demand out of the economy”.

Here’s the full story:

Introduction: UK inflation could hit 9% in April

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

The UK cost of living crisis intensified in April as households and businesses were hit by the worst cost of living crisis in decades.

The latest UK inflation data, due at 7am, is expected to show prices soared again last month. Economists predict consumer prices rose by around 9.1% over the last year, which would be the highest inflation rate in around 40 years, up from 7% in March.

Millions of households were hit by soaring energy costs last month, after Ofgem lifted the price cap on bills by 54%.

Food prices have been rising very sharply too, with Russia’s invasion of Ukraine driving up the cost of cereals, cooking oil and meat.

Michael Hewson, analyst at CMC Markets, explains:

Not only are consumers having to contend with higher gas and electricity prices, but also higher food and petrol prices, along with higher council tax, streaming subscriptions, gym memberships and other discretionary costs, as well as a pound that is 9% lower against the dollar from a year ago when it was at $1.3900.

While headline CPI is expected to rise from 7% to over 9%, core prices are expected to from 5.7% to 6.2%, while RPI is expected to rise from 9% to 11%, and a 40 year high.

The intensifying cost of living squeeze is certain to lead to more calls for action from the government to help struggling families, such as more support for energy bills, or uprating benefits in line with the current inflation rate.

A poll yesterday found that one in four people have resorted to skipping meals, while others have been borrowing money or going out less to make ends meet.

On Monday, the Bank of England governor said he was unable to stop UK inflation hitting 10 per cent this year, as most of the factors were beyond the BoE’s control, with the Ukraine war risking “apocalyptic” food prices.

The agenda

  • 7am BST: UK inflation report for April
  • 7am BST: UK producer prices index for April
  • 9.30am BST: UK house price index for March
  • 10am BST: Eurozone inflation report for April
  • 1.30pm BST: US building permits and housing starts




Reference-www.theguardian.com

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