News & views
Annual UK inflation rises to highest in 30 years – amid fresh concerns over cost-of-living crisisDate Posted: 5 March, 2022
According to the latest data from the Office for National Statistics (ONS), the UK’s annual inflation rate has climbed to its highest point in nearly 30 years.
After 13 consecutive months of increases, the Consumer Prices Index (CPI) inflation annual rate has now hit 5.5%. This is the highest it’s been since March 1992, just before a major crash on Black Wednesday in September that year.
Economists are also predicting that the CPI, the government’s preferred measure of cost of living in the UK, will rise even further in the coming months. In fact, it’s expected to reach a huge 8% by April. This is the point when consumer energy costs are set to shoot up by potentially hundreds of pounds per household.
What will this mean for household finances?
The latest ONS figures represent worrying news for British households, especially with a major leap in annual energy bills expected. The cost of household goods is also rising, and the government’s planned National Insurance increase is set to kick in this April.
Consumer groups are warning that this sharp rise in inflation could seriously harm living standards for many British people, particularly those on low incomes. Councils across the UK are seriously concerned about a “tidal wave” of need caused by the crisis, with an estimated 66,000 more people becoming homeless by 2024.
Business and jobs
Businesses are also concerned about the impact of rising inflation on the survival of firms already struggling following the Covid-19 pandemic – and many could be pushed towards insolvency.
A key factor exacerbating the cost of living crisis is the slow rise in annual wage growth, which isn’t keeping up with inflation. ONS data shows that average total pay (including bonuses) has increased to 4.3% in the three months to December 2021, beating economist expectations of a 3.8% rise. This is partly to do with rocketing numbers of job vacancies, which hit a record 1.3 million in January.
However, when inflation is taken into account, real pay has fallen by 0.8% compared to last year. And when inflation soars from April onwards, pay is likely to fall even further in real terms.
Speaking to the BBC about the impact of skills shortages, inflation and increasing wage demands on businesses, GMI Construction Group head Lee Powell explained:
“In the construction industry we’ve seen unbelievably rapid inflation across materials… and we’re in a situation now where the demands for wage increases are somewhat eye-watering.”
“You’d automatically assume you could pass those prices straight on to the developer or to the end user but it’s not as easy as that.”
Pay is rising however, with figures suggesting that it increased by 10% compared to February 2020. Employers are increasingly feeling the pressure to raise salaries in order to attract the workers they need, in an intensely competitive recruitment market.
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