UK inflation exceeds 10% for first time in 40 years

UK inflation exceeds 10% for first time in 40 years
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Inflation in the United Kingdom has risen above 10% for the first time since 1982. According to statistics published by the British Office for National Statistics (ONS) on 17 August, annual consumer price inflation rose from 9.4% to 10.1% in July, with the price of basic goods skyrocketing.

Food prices have now increased by 12.7% in the UK since last year and represented the largest single contributor to accelerated inflation. This record inflation exceeds predictions made by economists surveyed by Reuters. Food inflation is now at its highest level in 14 years.

“All the eleven food and non-alcoholic beverage classes made upward contributors to the change in the annual inflation rate, where prices overall rose this year but fell a year ago,” the ONS said.

Particular rises were seen for bread and cereals, milk, cheese and eggs. Other foodstuffs that drove inflation were meat, vegetables, sugar, jam, syrups, and confectionery.

Not just food

Recreation and culture have also become significantly more expensive for Brits, with the annual rate of inflation for activities rising from 4.8% to 5.6%. Other factors pushing up food prices were the high cost of gasoline, rising air fares, and diesel prices.

Last month, in a bid to control inflation, the Bank of England announced the largest increase in interest rates in 27 years, with the central bank raising the cost of borrowing by 50 basis points to 1.75%.

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There are fears that the UK may already have entered a recession. The ONS announced that the UK economy shrank by 0.1% in the second quarter of this year, fuelled by a drop in exports and lower consumer spending.

Inflation is fast outstripping wage growth in the UK. The ONS August labour market report reveals that British paychecks rose by 4.7% between April and June. When accounting for inflation, this means that average incomes dropped 3% in this period, the biggest fall in real wages since ONS records began nearly 20 years ago.

More hardship to come

Things look set to get worse before they get better. Unless radical action is taken, inflation is forecast to rise even higher across the country by the end of the year, largely due to the fact that energy bills could reach £4,266 (€5,067) from the end of the year. UK electricity prices have risen 54% and gas by 95.7% in the space of 12 months.

With the leadership race for No.10 Downing Street underway, there are still no concrete plans from the British government about what support will be offered to struggling British households. The British opposition, the Labour Party, is calling for a windfall tax on UK oil and gas companies, who are making massive profits due to high energy prices, to help fund household bills.

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