Across the UK economy companies have been passing on higher energy, shipping and oil costs to customers, leading to surging prices for everything from tinned tomatoes and Marmite, to used cars and home insurance. The retailer said prices for homeware items will jump 13% and fashion prices rise 6.5% in the second half of 2022 to average an 8% increase overall. Clothing prices are already rising, with inflation data showing overall clothing and footwear prices rose 8.8% in the year to February 2022.
Experts had already warned of incoming price rises in January,
But it has now increased its estimate of price increases in the second half of the year from 6% to 8%. February’s Consumer Price Index (CPI) print was above consensus expectations among economists polled by Refinitiv for a 5.9% annual figure, and vastly outstripped January’s previous 30-year high of 5.5%. On a monthly basis, CPI inflation was 0.8%, exceeding expectations for a 0.6% rise and marking the largest monthly CPI increase between January and February since 2009.
Increase in consumer price index and inflation
The price of an average UK home hit £265,312, more than £33,000 higher than March 2021. Price rises were evident across the country, with prices in Wales increasing by 15% over the year. House price growth accelerated in every region of England and Scotland. Detached homes have gone up nearly £68,000 in price since the start of pandemic, a 22% rise, as people working from home sought out bigger properties, while average flat prices have increased by £24,000, or 14%.
Rishi Sunak is under intense pressure
The chancellor, Rishi Sunak, is under pressure to cut fuel duty during his spring statement on Wednesday, at which the rising cost of living is likely to take centre stage. In the latest squeeze on household budgets, petrol hit a new high of 167p per litre on Sunday, while diesel reached 179p, according to figures from Experian Catalist. Oil prices had soared in recent weeks after Russia’s invasion of Ukraine but have since eased somewhat, prompting the AA to accuse fuel retailers of dragging their feet on passing on the reduction.
Rising interest rates, temporary treatment
The Bank of England has hiked interest rates at three consecutive monetary policy meetings, raising the costs of borrowing from its historic low of 0.1% to 0.75%, as it looks to contain runaway inflation without stomping out economic growth. Britain’s economy is expected to suffer a growth slowdown amid the biggest single shock from energy prices since the 1970s, the governor of the Bank of England has warned. Andrew Bailey said there were signs of slowing demand from consumers and businesses as they come under heavy pressure from the cost of living squeeze, with soaring prices for gas, electricity and other goods and services. “The shock from energy prices this year will be larger than any single year in the 1970s,” he said at an event held by the Bruegel thinktank in Brussels on Monday. “The caveat is that the 1970s had a succession of years and we very much hope that would not be the case now. But as a single year, this is a very, very big shock.”
Increase in national insurance in the wake of rising inflation
A planned 10% increase to National Insurance (a tax on earnings) kicks in for many workers in April, while at the same time the U.K.’s energy price cap soars 54% to accommodate higher costs of oil and gas, exacerbating the squeeze on household income as consumer prices continue to head north and Russia’s war in Ukraine shows little sign of abating.
UK inflation has climbed to a new 30-year high as soaring energy costs, fuel bills and food prices drive the worst cost of living squeeze in decades. Consumer prices rose by 6.2% in the year to February, up from 5.5% in January, the Office for National Statistics reports this morning. That’s the highest inflation reading since March 1992, as household budgets come under intense pressure.
The ONS figures raise concerns that some of the poorest in Britain are being forced to make tough choices between heating and eating. Household gas and electricity bills are expected to rise by 54% from Friday, with charities warning of a sharp rise in poverty levels without further government support for the poorest families. official forecasts show Britain is on track this year for the biggest annual hit to living standards since modern records began in 1956. Highlighting the risk to hard-pressed families, the ONS said as many as 29% of adults could not afford an unexpected but necessary expense of £850. 34% of those feeling the pinch report using less gas and electricity and 31% are spending less on food, According to an extensive survey of more than 13,000 adults in Great Britain, the Office for National Statistics (ONS) said as many as 83% saw an increase in their cost of living this month, up from 62% in November. As utility bills and the weekly shop became more expensive, the ONS said 34% of those reporting rising living costs said they were using less gas and electricity at home, while 31% said they were spending less on food. Half have cut back on non-essentials.
Impact of increased cost of living on adults across Great Britain, since November 2021 to March 2022 based ONS figures
- In early 2022 (6 January to 27 February 2022), an increase in the price of food shopping (90%), gas or electricity bills (79%) and the price of fuel (71%) were the most common reasons reported by adults who said that their cost of living had increased.
- In early 2022 (6 January to 27 February 2022), 29% of adults reported that their household could not afford an unexpected, but necessary, expense of £850.
In early 2022 (6 January to 27 February 2022), the most common reasons reported by adults who said their cost of living had increased were:
- An increase in the price of food shopping (90%)
- An increase in gas or electricity bills (79%)
- An increase in the price of fuel (71%)
In early 2022, the most common actions reported by adults who said their cost of living had increased were:
- Spending less on non-essentials (51%)
- Shopping around more (36%)
- Using less fuel such as gas or electricity at home (34%)
- Spending less on food shopping and essentials (31%)
RISHI Sunak announced a cut to fuel and income tax, as well as a boost to the housing support fund in his Spring Statement 2022. The mini budget was announced on March 2022, after calls for the Chancellor to do more to tackle the cost of living crisis. Funding for local councils to support vulnerable people will be doubled to £1billion from April 2022, the Chancellor announced. This means that low income families will receive extra financial support, perhaps in the form of vouchers, in order to navigate the cost of living crisis. The salary threshold before workers’ pay National Insurance will be increased to £12,570 from July 2022.
Sunak said: “That’s a £6bn personal tax cut for 30 million people across the United Kingdom.” Sunak’s final announcement in the Spring Statement 2022 was that the basic rate of income tax will be cut by 1p, from 20p to 19p per pound. He described the move as a “tax cut for workers, for pensioners, for savers. A £5bn tax cut for over 30 million people”. We have to wait for the situation to continue…