Surging inflation a key risk to UK growth prospects

Commenting on the inflation statistics for January 2022, published today by the Office for National Statistics, Head of Economics at the British Chambers of Commerce Suren Thiru, said: 

“Rising inflation highlights both the cost-of-living crisis facing households and the uphill struggle for businesses to keep a lid on price rises amid surging cost pressures. 

“While the headline annual figure remains at a 30-year high, the decline in monthly inflation in January offers some hope that we may be nearing the peak in the current spike in inflation. 

“Inflation should peak at over 7% in April as reversal of the hospitality VAT cut and the energy price cap rise enters the calculation. However, the current Russia-Ukraine tension could keep inflation higher for longer by triggering a further surge in wholesale energy costs.  

“Rising inflation could well be a significant drag anchor on UK economic output this year by weakening consumer spending power and damaging firms’ finances and ability to invest.  

“Increasing inflation means that a March interest rate rise is expected. However, tightening monetary policy too quickly risks undermining confidence and the wider recovery and will do little to curb the global factors behind the current inflationary surge. 

“More needs to be done to limit the unprecedented rise in costs facing businesses, including financial support for those struggling with soaring energy bills and delaying April’s National Insurance rise.”