Cost of living crisis: UK inflation rises to 30-year high

The soaring cost of goods and services have pushed the UK inflation rate to its highest level in almost 30 years, a major study has revealed.

Economists estimate that costs increased by an average of 5.4 per cent in the 12 months to December 2021, up from 5.1 per cent the month before.

It represents the highest level of inflation since March 1992, when the rate hit an eye-watering 7.1 per cent.

But with the gas and electricity price cap set to lift in April, experts suggest that the cost of living crisis will only worsen.

The Consumer Price Index (CPI) – the official measurement of inflation in the UK – takes into account the cost of eating out, accommodation, education, recreation and culture, communication, transport, health, furniture, housing, water, electricity and gas, clothing and footwear, alcohol and tobacco, and food and drink.

Commenting on the figures, Kitty Ussher, chief economist at the Institute of Directors, said: “Not only does this provide additional evidence that inflation is becoming endemic rather than transitory, it also bodes ill for households facing multiple rises in the cost of living this spring.

“We therefore expect interest rates to rise again when the Bank of England monetary policy committee next meets in early February.”

The report follows research suggesting that corporate insolvencies also rose by 11 per cent in 2021 compared to 2020, with business closures jumping from 900 a month in the first six months of the year to 1,400 a month in the second half of the year.

Martin McTague, National Vice-Chair of the Federation of Small Businesses (FSB), said the figures reflect “surging inflation”.

“The fresh support that the Government has promised to many firms is taking too long to reach the grass roots, and will not be enough to protect the futures of many when a jobs tax hike and business rates bills hit in April,” he said.

He added: “The tax rises coming in April could prove the final straw for many. The Government’s decision to increase National Insurance – a tax on jobs – looks increasingly indefensible when a record high number of small firms are already reporting cost increases across the board, driven by energy bills, rising input costs and staff costs. This tax hits businesses whether they make a profit, break even, or suffer a loss.”

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