There has been a lot of focus on UK inflation, which registered at 7.9 per cent in the year to June – down from 8.7 per cent the previous month. The high figures have persisted and caused tremendous concern for policymakers and consumers alike, as rising inflation costs have driven interest rates higher. The Bank of England uses interest rates as its tool to manage inflation, so the cost of mortgages and other forms of credit have risen rapidly and often in consecutive months throughout 2023. The base interest rate is currently five per cent and has risen 13 months in a row, with signs that it may rise again if inflation doesn’t start to come down.
Varying inflation on different products
The rates of inflation also vary between different product groups; for example, food inflation on products such as olive oil, sugar and cooking sauces has finally come down, although it remains higher than the inflation average at 17 per cent. The Office for National Statistics uses a ‘baskets of goods’ to measure inflation, with this basket changing regularly to reflect shopping patterns.
The causes of inflation
Why is inflation so high? The problem, as seen by Gloucester accountants with their clients, is primarily down to the war in Ukraine and onward pressures from Covid lockdowns that have continued to hamper supply chains. The war in Ukraine drove up gas and oil prices and reduced grain availability, which pushed up the price of food across the world. An accountant such as https://www.randall-payne.co.uk/services/accountancy/gloucester-accountants will be able to explain this further.
The UK experienced a shortage of vegetables in February that pushed food-related inflation to the highest levels in 45 years. The prices of alcohol in pubs and restaurants also rose. UK inflation continues to persist and has become combined with an ongoing cost of living crisis that continues to challenge UK consumers. The fear for many is that energy bills will rocket once again this winter, with the government under pressure to take action and provide assurance that inflation will be brought under control once and for all.