Inflation will continue to soar in the coming months as surging energy prices, rising raw material costs and the reversal of the VAT reductions for hospitality push it well above 6% by April.
Inflation will continue to soar in the coming months as surging energy prices, rising raw material costs and the reversal of the VAT reductions for hospitality push it well above 6% by April.
The latest figures confirmed a significant uptick in growth in November, before the emergence of Omicron and the implementation of Plan B. This is likely to be followed by a modest fall in output in December and January, as consumer caution to socialise and spend, and mounting staff absences limit activity.
The BCC’s Quarterly Economic Survey (QES) – the UK’s largest independent survey of business sentiment and a leading indicator of UK GDP growth – has shown the recovery stalled in the fourth quarter, with firms facing unprecedented inflationary pressures.
"The Bank of England’s decision to raise interest rates was surprising given mounting uncertainty over the economic impact of the Omicron variant."
It is concerning that inflation is outpacing wages and if this disparity continues to increase as we predict, real household incomes will be squeezed further, dampening consumer spending, and weakening overall economic activity.
The UK economy will grow at a slower pace than expected with trade set to lag significantly behind the wider recovery, according to the British Chambers of Commerce’s (BCC) latest economic forecast. Concern over the Omicron variant is also expected to weigh on Q4 growth.
Commenting on the inflation statistics for October 2021, published today by the Office for National Statistics, Head of Economics at the BCC Suren Thiru, said: “The latest data confirms that inflation is on a significant upward trajectory. “October’s upturn was largely driven by rising household energy costs following the increase in Ofgem’s energy price cap, rising fuel prices and the partial reversal of the VAT reductions for hospitality and tourism which drove up restaurant and hotel prices."
New BCC data released today from a survey of over 1,000 businesses has thrown sharp focus on the impact of skills and commodities shortages for UK firms, with spiralling prices in evidence.
The latest data confirms that the UK’s economic recovery lost momentum in the third quarter as significant staff and supply shortages limited activity.
While investments announced today will take time to bed in, Government should consider other action that will relieve immediate pressures, particularly on smaller businesses. This should include an urgent review of the shortage occupation list to allow for short-term visas in key sectors, and an SME energy price cap.
