The UK inflation rate was pushed up to 2.9% last month, due largely to the rising cost of foreign package holidays and imported computer games. The rate is up from 2.7% in April 2017. This inflation rate is the highest since June 2013 and is above the Bank of England’s 2% target.
The Office for National Statistics also recently reported a rise in food and clothing prices although fuel prices have fallen for the third consecutive month. Since the Brexit vote last June, the supressed value of the pound has increased the cost of imports, which has been one of the main factors in the rise in inflation. The most recent ONS data also shows that average weekly earnings increased by 2.1% in the three months to March, not keeping up with the rise in inflation.
Head of UK macroeconomic forecasting at the National Institute of Economic and Social Research, Amit Kara said “We expect inflation to rise further over the course of this year and to reach a peak in the final quarter of 2017.”
Kara continues “This spike in inflation will exert further downward pressure on real household disposable income, at a time when wage growth remains modest, and in turn squeeze consumer spending.”
If you are worried about the rise of inflation and what effects it could potentially have on your business including bad debt impacts, please get in touch with one of our specialist advisors on 01275 817320.