Today’s businesses spoke out about the dire consequences of rising inflation. They said that hotels had to close their floors in order to cut energy costs, while shops were forced into a “fight to survive” mode. Iceland warned customers that rising prices would force them to seek food banks.
The rate of Consumer Price Index inflation in Britain has increased by more than expected to 5.4 per cent – up from 5.1 per cent in November and its highest rate in 30 years, ONS data revealed today.
Sadie Shard, who runs the Crescent Hotel in Scarborough, said she had gone from paying £2,000 a month to energy to £10,000.
“We have closed the bar quite a bit of times per week, because it isn’t enough to pay our energy bills. We’ve also been closing some floors when guests are not present, in order not to use any extra gas,” she said on BBC Radio 4’s Today program.
We have no option but to raise prices. Hotels usually drop their prices in winter, but this is not an option.
Richard Walker, managing director of Iceland, said that rising prices, a fall in real-term wages, tax rises, and a cut to Universal Credit top-ups had hit customers with a ‘perfect storm’ of problems.
‘There has been an alarming increase in food branches in the country – I think there are more food banks now than there are branches of McDonalds,’ he said. This isn’t an exaggeration. There’s a choice to be made between heating and eating. We are losing customers because of hunger.
Barry Whitehouse is owner of The Artery, a Banbury-based shop that sells art. He said, “It’s the perfect storm to help small businesses.”
Adam Bamford was co-founder Colleague Box in Derby, which sells corporate gifts.
Walker stated that he expects inflation to rise further. He added: “We have been discussing inflation hitting food prices since some time. It’s happening throughout the supply chain. Everything from commodity prices, labour shortages and shipping and HGV driver cost, energy prices as well as national minimum wage increases and new taxation.
“Business isn’t an endless sponge that absorbs these costs forever so we’ll be able to see the results on the shelves.” This is the perfect storm to our customers.
Luke Johnson, a entrepreneur said that manufacturing companies are particularly susceptible to rising energy costs.
MailOnline was told by he that 40% of the power prices in a business he manages is rising.
The UK’s green taxes are a significant cost-burden and make it less attractive to do business.
Dawn Hopkins, owner of the Rose Inn in Norwich and vice chair of the Campaign for Pubs, said: ‘I put my prices up late last year and it’s going to be something I’m going to have to consider again this year’
Sadie Shard, who runs the Crescent Hotel in Scarborough, (pictured) said she had gone from paying £2,000 a month to energy to £10,000
MailOnline was also told by other business owners that they were forced to raise their prices repeatedly.
Barry Whitehouse of The Artery in Banbury said that it was the ideal storm for small business.
We have received letters from virtually every supplier warning us of price hikes due to rising prices of raw materials. These are being passed onto our company and are also passing on to our customers.
“Slim margins, little purchasing power and low buying power will only increase the gap between online giants that can sometimes afford larger quantities of goods and the price increases.
Richard Walker, Iceland’s managing director (seen here with Prince Charles in August) commented: “The number this morning at 5.4% will likely increase further.”
Adam Bamford was co-founder Colleague Box in Derby, which sells corporate gifts.
“Our suppliers are forced to pay higher for every aspect of production, which leads to daily email of price rises that place even more strain on our company.
“We are not discussing profits anymore as it is a struggle to survive, rather than making money.
Wilfred Emmanuel-Jones, 64, who runs the popular Black Farmer food range, said: ‘A lot of our products have been hit by inflation, especially chicken, which is up by between seven and ten per cent.
“There is an eerie storm brewing at the moment. Most of the Eastern Europeans granted temporary visas over Christmas that had expired have returned home. Transportation costs are rising and so is energy.
“We now have to contact all retailers and ask them for an increase in price, but they’re very resistant as they’re engaged in price wars with one another.
“Britain is home to the most high food standards worldwide, which means that there are no cheap imports.
Wilfred Emanuel-Jones (64), who owns the Black Farmer food line, stated that a lot of their products were affected by inflation. He especially noted that chicken prices have risen by seven to ten percent.
‘A lot more cheap chicken is flown from Thailand or Poland. People would be horrified to learn what kind of conditions they were kept in.
“The British consumer now has many options. The choice is theirs.
Dawn Hopkins, the Rose Inn owner in Norwich, is vice chair of Campaign for Pubs.
“I set my prices high last year, and this is something that I will have to reconsider.”
Bank of England governor says inflation is likely to stay high longer than predicted after reaching a peak of 5.4% in 30 years. This does not mean that interest rates will return to levels before the financial crash.
MailOnline by Mark Duell
Today, the Bank of England’s governor warned that inflation may last for longer than originally thought. After hitting a 30 year high of 5.4%, he said interest rates would not return to the levels they were before the financial crash.
Andrew Bailey stated to MPs in the Treasury Select Committee, “Financial markets do not anticipate that energy prices will start falling back before the second half 2023.”
Wholesale gas prices have been falling since last summer. This was not the case until just a few short months ago. It was a “big shift” and it could impact Bank expectations of higher inflation being temporary.
He added that part of the increase in gas price anticipations is due to increasing tensions between Russia & Ukraine.
He said to the MPs that he was honest and had great concerns about it.
Bailey stated that oil prices rose 12% from January to January.
This hearing was held as official statistics on Wednesday revealed that December’s inflation reached 5.4% – the highest point in almost thirty years.
Global counterparts of the Bank have maintained that most factors driving inflation, such as disruptions in global supply chains and rises in wholesale energy prices, would remain ‘transitory.
Andrew Bailey stated that there is a structural reason for the low interest rates in both the UK and around the globe.
Now, inflation has reached historic heights. Pictured: A graph showing inflation between 1992 and the current date. It is based upon ONS data
UK Interest Rates: They were at 5.5% before the financial crisis, but they have fallen to new records.
A graph from ONS showing the Consumer Prices Index, including the Owner Occupants’ Housing Costs (CPIH), Consumer Prices Index(CPI) as well as the Consumer Prices Index.
Bailey stated that there was a “structural reason” for low interest rates across the UK, and the rest of the world. It is due to the demand for greater investment in order to address the challenges of an ageing population as well as low productivity.
Bailey stated that the Bank believed that no changes were occurring that could alter this’structural tale’.
He said, “So, when people claim we can go back to pre-financial crises days,” he replied. “That doesn’t mean interest rates will not rise. It’s just to show how much.”
On the day of the financial crisis, interest rates were at 5.5%. They then plummeted as the Bank attempted to stimulate businesses to spend again.
In Britain, the Consumer Price Index inflation rate is 5.4%. It was 5.1% in November. That puts further pressure on households already struggling as high energy prices continue to rise.
The current BoE base interest rate is currently just 0.25%. Capital Economics predicts it could rise to 1.54%, according to research.
The rising cost of gas and electricity is putting pressure on household finances. In addition, supply chain issues and price increases are affecting the entire economy.
Pensioners will be particularly hard hit, with the scrapping of the triple lock meaning a planned 8.3 per cent increase will now only be a 3.1 per cent boost, just as the cost of essential goods surges more than 6 per cent.
This comes just days after data from yesterday showed that inflation had outpaced wage growth in November 2021 for more than one year, the first such event since July 2020.
New official figures showed house prices by £25,000 last year and continued to climb even after the end of the stamp duty holiday.
Meanwhile, the cost of a £200,000 mortgage could rise by £1,200 a year if interest rates rise to one per cent.
Following the recent inflation numbers, unions are stepping up their campaigns to increase pay. This is despite warnings about a “cost-of living catastrophe” for workers.
On December 1, the ONS reported that the UK’s price for goods was 9.3 percentage higher than November’s 9.4 percent increase.
The price of fuel and materials used by producers rose 13.5% in December, compared to the 15.2% growth in November.
There were many goods and services that contributed to the inflation increase. The biggest effect was on food and drinks, then hotels, restaurants and furniture.
It was the highest figure since March 1992 when it stood at 7.1%. This puts pressure on Bank of England to increase interest rates next month.
Last month, The Bank was the first major central bank worldwide to increase interest rates by 0.1% to 0.25 % since the beginning of the pandemic.
The move, which was an attempt to try to cool the rampant inflation rate, came a day after data showed CPI had unexpectedly surged to a 10-year high in November.
Boris Johnson faces pressure from politicians to reverse an April 50 percent rise in energy prices for households.
Rishi Sunak today responded to CPI inflation rising. “I fully understand the stress people face with living costs and will listen to their concerns, just as we did throughout the pandemic.”
‘We’re providing support worth around £12billion this financial year and next to help families with the cost of living.
“We are cutting the Universal Credit taper to ensure work pays. We also freeze alcohol and fuel duties in order to lower costs. And we provide targeted assistance to households to assist with energy bills.
CPI forecasts that CPI will reach its highest point in 30 years at 6 percent in April. Higher energy bills will mean it will take CPI longer than two more years before reaching its 2-percent target.
According to the ONS, December’s rise was due to higher food prices as well as higher clothing and furniture costs. This graphic shows CPIH’s 12-month inflation rate.
The largest contributor to the CPIH annual inflation rate change was food and drink
Financial markets see a high chance that the Bank of England will raise rates again on February 3 and announce that it will allow its £875billion stock of government bonds to fall as the gilts begin to mature.
Armed Forces minister James Heappey said the Government is looking at what more can be done to help households with the cost of living crisis.
BBC Breakfast: He stated that rising inflation is a “real concern” and added, “The government is considering what additional actions could be taken.”
I don’t believe viewers have learned anything because they’d seen their bills rise over the previous few months.
“But, it’s a headline which reminds us all at Government that millions of people are worried about how they can heat their homes and feed their families.
“That is why the Chancellor, the Business Secretary, and the Prime Minister have begun to look at the government’s potential and actual assistance.
Jonathan Reynolds, shadow business secretary to BBC Radio 4, stated this morning on BBC Radio 4’s Today that families face a “triple whammy”.
According to him, ‘Real wages and real incomes have fallen due to inflation. Significant tax rises have occurred. There have been huge increases in your energy bills.
“It’s our responsibility to hold the Government accountable and that’s exactly what we are doing. We’re also laying out costed alternatives that could make a significant difference in people’s income.
“Again, that’s in a positive contrast with a government which seems unable to defend itself.
Also, the data showed an unseasonal rise of 0.7 percent in footwear and clothing prices
Since 2009, the CPIH had a higher contribution from housing and household services.
Grant Fitzner is the chief economist of the ONS. He stated today that the inflation rate rose at the end and was not higher in nearly 30 years.
How did 1992’s Black Wednesday turn into a 15% rate of interest?
In December 2021, the Consumer Prices Index was 5.4%. This is the highest rate since March 1992 when it was 7.1%.
This was the period that followed 1991’s UK recession. It was caused by high interest rates and plummeting property prices.
Norman Lamont (Chancellor) speaks out on the departure of Britain from the Exchange Rate Mechanism. This was Black Wednesday, 1992.
Black Wednesday was September 16, 1992. The UK exited the Exchange Rate Mechanism, (ERM), and the Pound was devalued by 20%. That was just one example of its overvaluation.
It followed the end of the 1980s’ economic boom, which resulted in a large economic expansion and an increase in property prices. This was during a period of great consumer confidence.
In September 1996 the government increased interest rates as much as 15%
In 1990, the Government joined ERM with the intent of reducing inflation. However, the economy began to slow down. It became increasingly difficult for the British Pound to maintain its target exchange rate against the Deutsche Mark.
In order to maintain the value, the Government borrowed foreign currency to purchase sterling. This allowed the Government to increase interest rates as much as 15%. However, this was insufficient and they had to abandon the EMR and devalue their currency.
The reason for a decline in home prices is that many could not afford to make the mortgage payments. Consumer confidence fell and so did household wealth.
In 1992, unemployment was at over 10%. House prices fell by 10% in 1990 due to rising home repossession rates.
“Food prices rose again, while furniture and clothing price increases pushed up the annual inflation.
These large increases were partially offset by the rise in petrol prices. They were at their highest levels this month but were still stable, however, they rose last year.
“The economy’s closures last year had an impact on some items, but overall this has negligible effect on the inflation rate.
Core CPI, which does not include volatile food, energy or tobacco prices, rose to record levels of 4.2 percent in December, compared with November’s 3.9%.
Retail price inflation, an older measurement that the ONS states is not accurate but is still used widely by government and business, rose to 7.5% from November’s record of 7.1%.
The British Chambers of Commerce also warned that inflation could rise further in the months ahead and may surpass 6% by April.
Suren Thiru (head of economics, BCC) stated that this morning, “Higher inflation is contributing to the unprecedented increase in costs faced businesses.”
“The combined effect of rising energy prices, increased input costs and the looming National Insurance increase means firms feel more under pressure to raise their prices.
“The inflation rate will increase as a result of rising fuel prices and higher costs for raw materials, plus the reversed VAT cuts in hospitality. By April it will be well over 6 percent.
In addition, she stated that while a surging inflation rate means an interest rate hike in February’may be inevitable’ but that raising rates too aggressively risked undermining confidence. It will also do little to slow down the impact of the global factors driving the current inflationary rise.
According to the ONS, food and beverage prices rose by 4.2% year-on-year in December. This is the largest increase since September 2013.
Also, clothing shops raise their prices an average of 4.2 percent.
Consumer pockets continue to suffer the most from the rising energy costs after the October price cap increase. Experts warn of a jump in the cost of electricity by more than 50% when the April revision comes out.
In the meantime, motorists also have had to deal with painful increases in petrol prices. The ONS stated that average petrol prices remain at record levels of 145.8pence per litre. This is compared to 114.1pence per litre a full year ago.
According to the ONS, rising used car prices are another reason for the rise in CPI since 2020.
CPIH is the ONS preferred measure for inflation and includes the cost of homeowner housing. It was 4.6% in November and 5.8% in December. This figure marks the highest recorded since September 2008.
Pantheon Macroeconomics analyst Samuel Tombs said that December’s inflation figures have left the Bank of England with no choice but to increase rates again during February.
According to him, CPI will likely reach a peak of’slightly more than’ 6 percent in April.
Boris Johnson yesterday during his visit to North London’s Finchley Memorial Hospital
Last October’s photograph shows Rishi Sunak as Chancellor. He said that he understood the difficulties people face with rising living costs.
However, we still expect CPI inflation in April to drop quickly and to eventually fall below the Bank’s 2 per cent target for 2023.
The latest figures show that property prices increased by 10% annually from November 2021 to December 2021.
The price of houses rose by just 9.8 percent in October. This was a slight increase from the previous month.
The average house price was £271,000 in November 2021, which is £25,000 higher than the same time last year.
Figures show that even after September 2021’s stamp duty holiday, house prices continued their climb.
The tax break, which lowered home buyers’ bills by up to £15,000, contributed to rapidly rising prices after it was introduced in July 2020.
This was despite the cost of a home increasing by £10,000 more than the maximum tax break.
Current owners are facing a difficult time meeting their mortgage payments with rising costs.
Last month, Bank of England raised base rates from record lows of 0.1% and 0.25 percentage points. Further increases in 2022 are planned to control inflation.
For millions with variable and tracker rates, mortgage repayments are more complicated if the base rate is increased.
Figures from broker L&C Mortgages show that if the base rate rose to 1 per cent, a household with a £200,000 mortgage would need to shell out an extra £1,200 per year compared with before the pandemic.
It is possible for many households to not be able to pay their mortgages.