As the rising cost of gas and electricity pushed household energy bills to record levels, UK inflation soared to 9% in April – its highest level for more than 40 years. The escalating cost of food and transport also contributed to the rising cost of living, deepening the crisis affecting millions of low- and middle-income families.
The Office for National Statistics said the 54% increase in the energy price cap in April, which took the average annual gas and electricity bill close to £2,000, was the main reason for the jump in the consumer prices index from 7% in March.
Business groups are saying that all sectors of industry and commerce were suffering from the steep rise in energy and fuel costs, with many facing a similar shock to their finances as seen during the pandemic but without the same level of government support.
The end of a temporary VAT cut for the hospitality industry also pushed up prices after restaurants and hotels said they were unable to cushion customers from the increase in the tax from 12.5% to 20%. A steep fall in the value of the pound on foreign exchange markets piled further pressure on businesses by adding to the cost of imports. Sterling has slumped since last month, from more than $1.30 to $1.24 after hitting $1.22 last week.
Food banks have reported an increase in demand for food packages after the rise in energy bills, while many small business owners have said a combination of higher costs and tax increases have pushed them to the edge of bankruptcy.
Labour market figures released recently showed that average total wages increased by 7% in March, pushed up by bonus payments to staff and consultants working in the finance, IT, construction and professional services sectors. However, income growth has not been evenly distributed. The average pay rise without bonuses was only 4.2%, hitting millions of workers with a fifth consecutive month of falling real wages.
