UK in crisis as inflation hits 30-year peak

BRITAIN’S cost-of-living crisis is deepening, with inflation hitting a 30-year high, new data from the Office for National Statistics will show this week.

On Wednesday, the ONS is expected to say that inflation, as measured by the consumer price index, rose half a percentage point to 6.7 per cent last month. That would be the highest level of CPI inflation seen since March 1992, when it hit 7.1 per cent.

The day before, economists believe that the ONS will say that average earnings grew by 5.4 per cent in February, up from 4.8 per cent the month before.

However, economists warn the squeeze on household finances will get worse as inflation will continue to outstrip earnings growth. CPI inflation is forecast to hit 8.5 per cent this month because of the 53.4 per cent increase in regulator Ofgem’s energy price cap. That would beat the all-time CPI high of 8.4 per cent set in April 1991. Investec chief economist Philip Shaw said: “With inflation, we are likely to have seen a further, relentless increase and that’s just March. Now, in April we’ll have the rise in the energy price cap. Average earnings will not keep pace (with inflation). We are seeing sharp upward pay trends for new joiners but living standards will be cut as inflation is outpacing pay growth.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “We expect CPI inflation to jump to 8.5 per cent in April and to ease to only about 7.5 per cent by the end of the year.

“Consumers, however, should see some relief in 2023, when energy prices should fall back to Earth.” However Bank of America warned that rather than peaking in April and slowly easing over the rest of the year, inflation could hit a second peak in October, after Ofgem’s late summer review of the price cap.

UK economist Robert Wood said: “We factor in a 22 per cent utility price hike in October, assuming the government’s £200 ‘rebate’ reduces the bill counted in CPI. If the statistics office judges the rebate does not count in the CPI, we would see a 32 per cent hike included in the inflation figures, raising October inflation to 8 per cent.”

Elsewhere, employment climbed last month to its strongest level since the start of the pandemic, according to accountants BDO. Its latest employment index rose for a fifth consecutive month to 112.74, above the 95 level which indicates growth. But it warned growth could be short-lived due to inflation, supply chain disruption, the Ukraine invasion and geo-political tensions.