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Inflation news - live: ‘Real chance’ of recession as price rises hit 40-year high

·15-min read
Inflation has hit its highest level in 40 years amid the deepening cost of living crisis (Getty Images)
Inflation has hit its highest level in 40 years amid the deepening cost of living crisis (Getty Images)

The “unprecedented” impact of rising inflation means there is a “real chance” of a recession later this year, the British Chambers of Commerce has warned.

Inflation has hit its highest level in 40 years amid the deepening cost of living crisis.

The rate shot up to a fresh record high of 9 per cent last month, up from 7 per cent in March, following a £700 increase to energy bills.

Suren Thiru, head of economics at the British Chamber of Commerce, said: “The scale at which inflation is damaging key drivers of UK output, including consumer spending and business investment, is unprecedented and means there is a real chance the UK will be in recession by the third quarter of the year.”

He called for chancellor Rishi Sunak to reverse the rise in National Insurance Contributions and cut VAT on business energy bills to 5 per cent.

It comes after Andrew Bailey, governor of the Bank of England, warned of “apocalyptic” food prices in the months ahead due to the war in Ukraine.

Key Points

  • Boris Johnson promises to ‘look at all measures’ to help people amid record inflation

  • Sunak considering £600 payment to help poorer families heat homes

  • Eastbourne council becomes first to declare ‘cost of living emergency’

  • Petrol and diesel prices reach record high

  • ‘Real chance’ of recession later this year

  • Inflation reaches fresh record high at 9 per cent

07:48 , Chiara Giordano

Good morning and welcome to The Independent’s live coverage of the cost of living crisis.

Inflation has hit its highest level in 40 years after shooting to 9 per cent in April, the Office for National Statistics has revealed today.

Stay tuned for rolling updates and reaction.

Inflation reaches fresh record high at 9 per cent

07:50 , Chiara Giordano

Prices rose at their fastest rate in more than 40-years in the 12 months to April as households struggle with a sharp increase in energy bills.

Inflation climbed to a fresh record high of 9 per cent last month, up from 7 per cent in March, following a £700 increase to energy bills.

Around three-quarters of the overall surge in inflation came from higher energy bills.

Our economics editor Anna Isaac has the full story:

Inflation reaches fresh record high at 9 per cent

Warning of ‘historic squeeze’ in household finances

08:17 , Chiara Giordano

The Confederation of British Industry warned of a "historic squeeze" in household finances and a "tough trading environment" for businesses.

The business organisation increased pressure on chancellor Rishi Sunak to bring forward extra help to deal with the rising cost of living.

CBI chief economist Rain Newton-Smith said: "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."

‘Real chance’ of recession later this year

08:19 , Chiara Giordano

The British Chambers of Commerce said the "unprecedented" impact of rising inflation meant a "real chance" of a recession later this year.

BCC head of economics Suren Thiru called for Rishi Sunak to reverse the rise in National Insurance Contributions and cut VAT on business energy bills to 5 per cent.

He said: "The jump in UK inflation in April is eye-watering and underscores the growing cost-of-living crisis facing households and the damaging squeeze on firms' ability to invest and operate at full capacity.

"The marked acceleration in the headline rate in April reflected the continued upward pressure on prices from surging energy and commodity costs, as well as the energy price cap rise and the reversal of the VAT reduction for hospitality in the month.

"The scale at which inflation is damaging key drivers of UK output, including consumer spending and business investment, is unprecedented and means there is a real chance the UK will be in recession by the third quarter of the year."

Another interest rate rise in June was "inevitable" but that would do little to address global factors driving inflation up, he said.

Impact of rising inflation on poorer households higher at 10.2%, says think tank

08:35 , Chiara Giordano

The impact of rising inflation is being felt harder in poorer households, living standards think tank the Resolution Foundation said.

While CPI inflation hit 9 per cent in April, the think tank estimates that inflation for the poorest households was higher still at 10.2 per cent because they spend a greater share of their budgets on energy bills, which have risen sharply.

Jack Leslie, senior economist at the Resolution Foundation, said: "Inflation reached a 40-year high last month off the back of a sharp rise in energy bills and the highest food price inflation in a decade.

"These recent drivers of inflation mean that lower-income families are facing the most severe cost pressures, with their inflation rate already hitting double digits.

“Inflationary pressures are likely to continue to grow through the year as the effects of higher energy prices continue to work their way through businesses and into consumers' pockets.

"Nobody knows how long these pressures will last, or how workers will respond via higher wage demands, which is why the Bank faces a tough judgement on the pace and scale of interest rate rises.

"But one thing is certain, the government must provide further targeted support for those lower income families at the sharp end of this crisis."

Inflation rate experienced by poorest households ‘could be closer to 11 per cent'

08:45 , Chiara Giordano

The Institute for Fiscal Studies economic think tank suggested the inflation rate experienced by the poorest household could be closer to 11 per cent.

"As poorest households spend more of their total budget on gas and electricity, we now see inflation hitting the poorest households harder," according to analysis by the think tank's Heidi Karjalainen and Peter Levell said.

"In April, the bottom 10 per cent of the population in terms of income faced a rate of inflation rate of 10.9 per cent, which was three percentage points higher than the inflation rate of the richest 10 per cent.

"Most of this difference comes from the fact that the poorest households spend 11 per cent of their total household budget on gas and electricity, compared to 4 per cent for the richest households."

Think tank defends Bank of England for not raising interest rates sooner

08:57 , Chiara Giordano

The chief executive of a British think tank has defended the Bank of England after critics argued they should have raised interest rates earlier.

Torsten Bell, the chief executive of the Resolution Foundation, which is dedicated to helping low and middle-income families, told BBC Radio 4's Today programme the Bank of England "were slow in seeing the pace and the scale of this inflation shock that was coming through this year”.

"I think it's then when they go too far is to say, look, if the Bank of England had raised rates a bit earlier, this wouldn't be happening right now,” he said.

"That is total and utter nonsense.

"In the end, what the Bank of England is doing with raising interest rates isn't about avoiding this pain from energy bills.

"It's about avoiding future pain of inflation becoming embedded as a very tight labour market leads to wage pressures and that could lead to wage pressures that we can't sustain without a further round of inflation."

‘We cannot protect people completely,’ says Rishi Sunak

09:10 , Chiara Giordano

Chancellor Rishi Sunak said "we cannot protect people completely" from global problems which contributed to inflation hitting 9 per cent in April but we "are providing significant support where we can, and stand ready to take further action".

What does the rising rate of inflation mean for you?

09:29 , Chiara Giordano

The present inflation spike means that the price of everyday items like staple foods – particularly fruit and vegetables – fuel, clothing, shoes and furniture have all climbed over the last year, a development that threatens to hit low-income families hardest at a time when they can least afford it.

My colleague Joe Sommerlad has put together this explainer on how it could affect you:

What does the rising rate of inflation mean for you?

Petrol and diesel prices reach record high

09:59 , Chiara Giordano

Petrol and diesel prices have reached record highs, according to new figures.

Statistics from data firm Experian Catalist show the average cost of a litre of petrol at UK forecourts on Tuesday was 167.6p.

The previous record of 167.3p was set on March 22, the day before a 5p cut in fuel duty was implemented.

Diesel prices continue to climb to new highs, reaching an average of 180.9p per litre on Tuesday.

UK house prices rise by 9.8% in one year

10:08 , Chiara Giordano

The average UK house price was £278,000 in March 2022, which was £24,000 higher than a year earlier, the Office for National Statistics (ONS) said.

Property values increased by 9.8 per cent over the year to March 2022, which was a slower rate of growth than a 11.3 per cent increase in February 2022.

Average house prices increased over the year in England to £298,000 (a 9.9 per cent annual increase), in Wales to £206,000 (11.7 per cent), in Scotland to £181,000 (8 per cent) and in Northern Ireland to £165,000 (10.4 per cent).

Petrol and diesel prices soar to new record highs

10:18 , Chiara Giordano

Petrol and diesel prices have reached a record high, according to new figures.

Statistics from data firm Experian Catalist show the average cost of a litre of petrol at UK forecourts on Tuesday was 167.6p per litre. The previous record of 167.3p was set on 22 March, the day before a 5p cut in fuel duty was implemented.

My colleague Thomas Kingsley has more details:

Petrol and diesel prices soar to new record highs

Cost of living: how to get help

10:37 , Chiara Giordano

The cost of living crisis has touched every corner of the UK, pushing families to the brink with rising food and fuel prices.

  • The Independent has asked experts to explain small ways you can stretch your money, including managing debt and obtaining items for free.

  • If you need to access a food bank, find your local council’s website using gov.uk and then use the local authority’s site to locate your nearest centre.

  • The Trussell Trust, which runs many foodbanks, has a similar tool.

  • Citizens Advice provides free help to people in need. The organisation can help you find grants or benefits, or advise on rent, debt and budgeting.

  • If you are experiencing feelings of distress and isolation, or are struggling to cope, The Samaritans offers support; you can speak to someone for free over the phone, in confidence, on 116 123 (UK and ROI), email jo@samaritans.org, or visit the Samaritans website to find details of your nearest branch.

Exclusive: Eastbourne council becomes first council to declare ‘cost of living emergency’

10:45 , Chiara Giordano

Eastbourne is to become the first council in the UK to declare a “cost of living emergency” as a record number of people in the south coast town are forced to turn to food banks to survive.

The Liberal Democrat-run local authority is expected to pass the unprecedented motion later on Wednesday in a bid to address the sharp rise in poverty in the English seaside resort.

Adam Forrest has this exclusive story:

Council becomes first to declare ‘cost of living emergency’

‘Could of bumps to get through’ before inflation settles down, says minister

11:05 , Chiara Giordano

There could be a "couple of bumps to get through" before inflation settles down, a cabinet minister has said.

International trade secretary Anne-Marie Trevelyan told an event at Bloomberg's headquarters in London that countries were "facing a global battle against inflation".

Answering a question about inflation and the cost of living after her speech on green trade, she said: “The worry we always have is that inflation tends to have two bumps to it.

"You have the initial one that is caused by this energy spike and immediate global rise but what can follow is the longer term impact and indeed through food production and particularly with disruption to Ukraine.

"So we know that we will probably have a couple of bumps to get through before we will see, we hope, stabilisation and a reduction as the energy crisis settles."

‘No time to lose’ to help those struggling with surging living costs, charity warns

11:17 , Chiara Giordano

There is no time to lose to prevent the situations of people who cannot absorb surging living costs from drastically worsening over the coming months, a charity has warned.

StepChange Debt Charity said the surging cost of living is among the most common reasons people with financial struggles are giving for their debts.

Among StepChange clients, the cost of living is the third most commonly cited reason for their debt.

Wider survey data commissioned from YouGov by the charity in March found 24% of people were worried about inflation and felt they were likely to go into debt as a result but would be able to cope, while 11% felt they were likely to incur debt that they would not be able to repay.

StepChange director of external affairs Richard Lane said: “We need to see targeted support specifically aimed at those households whose budgets don’t have the bandwidth to absorb higher costs - such as people on low incomes and relying on social security for some or all of their income, and those with vulnerabilities that mean they have specific needs and cannot cut their spending in areas such as energy or food.

“These groups are already over-represented among those experiencing problem debt, and there is no time to lose if their financial situation is to be prevented from worsening drastically over the coming months.”

Opinion: Giving the government control over interest rates would be a disaster

11:39 , Chiara Giordano

After inflation hit a 40-year high of 9 per cent today, Conservative MPs, including some ministers, are again pointing the finger of blame at the Bank of England and its governor Andrew Bailey for raising interest rates too slowly, writes political columnist Andrew Grice.

Worryingly, some senior Tories are even raising the question of whether the Bank should lose its operational independence on monetary policy, threatening the 25-year consensus since Gordon Brown ceded the politicians’ control of interest rates to the Bank.

Giving the government control over interest rates would be a disaster| Andrew Grice

Sunak considering £600 payment to help poorer families heat homes

12:07 , Chiara Giordano

Three million less well-off households could be given a payment of up to £600 to help them with fuel bills, under plans being considered by chancellor Rishi Sunak.

It is understood that a one-off increase in the Warm Homes Discount – currently worth £150 a year – is one option being looked at by the chancellor, who is coming under growing pressure to deliver a package of help for the cost-of-living crisis.

Our political editor Andrew Woodcock has the full story:

Sunak considering £600 payment to help poorer families heat homes

Boris Johnson promises to ‘look at all measures’ to help people amid record inflation

12:12 , Chiara Giordano

Boris Johnson has promised to “look at all the measures that we need to take to get people through to the other side” after inflation hit a 40-year high in April.

Labour accuses Scotland’s two governments of ‘compounding cost-of-living crisis'

12:24 , Chiara Giordano

Labour has accused Scotland's two governments in Holyrood and Westminster of "compounding the cost-of-living crisis".

Shadow Scotland secretary Ian Murray said: "Inflation is at a 40-year high but in reality according to the Institute for Fiscal Studies today it is much higher for most households. The weekly shop, the energy bill, petrol for the car, taxes, all rising to the extent that 150,000 more Scots can't pay their bills today.

"In 2022, too many children go to bed hungry or cold or both. The Chancellor keeps saying he stands ready to act but refuses an emergency budget. His acts so far have raised taxes to the highest in 70 years and dropped living standards by the highest amount since the 1950s."

To jeers from the SNP, he added: "Scotland has two governments making decisions that are compounding the cost-of-living crisis. So can the Secretary of State tell us what he is doing to get the Chancellor to act if he is not acting now?"

Scotland minister Iain Stewart replied: "I would point out to him the inflationary pressures are global as a result of the pandemic, as a result of the war in Ukraine and other global supply chain pressures.

"This isn't an issue unique to the United Kingdom. I have already set out that the Chancellor has delivered a £22 billion support for the people of this country, he is keeping a very close eye on the situation and will intervene where necessary."

How does record inflation rise impact your finances?

12:33 , Chiara Giordano

Inflation has surged to 9 per cent - the highest in 40 years.

Prices are rising faster than wages, on average, meaning that people's living standards will fall this year.

But what is causing the cost of living to rise and how will it affect your finances?

Our business correspondent Ben Chapman explains here:

Inflation hits 9%: How does it impact your finances?

Head over to our UK politics live blog for more coverage

12:35 , Chiara Giordano

Thank you for following our live coverage of the cost of living crisis this morning.

This blog is now closing, but you can head over to our UK politics live blog to follow more updates.

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