The huge pressures faced by businesses were laid bare as the Office for National Statistics revealed inflation edged up to 9.1% in the 12 months to May, up from 9% in April.
This means prices are continuing to rise at their fastest rate for 40 years and the British Chambers of Commerce (BCC) expected future price expectations to be beyond anything seen since the the BCC began keeping records in 1989.
Currently, inflation is at the highest level since March 1982, when it also stood at 9.1% and the Bank of England has warned it will reach 11% this year.
David Bharier, Head of Research at the BCC, said: “The further increase in Consumer Prices Index inflation to 9.1% underscores the severe pressure that businesses and households are under.
“In early 2021, firms were already flagging huge spikes in raw material and shipping container costs as the world economy began re-opening.
“Since then, global factors have continued to drive up commodity costs, and more and more sectors have been impacted.
“Our own measures tracking firms’ price expectations are currently far beyond anything we’ve seen since our records began in 1989. In Q1 2022, 62% of businesses expected to increase their prices over the next three months, rising to 75% for retailers and wholesalers.
“This has been borne out in today’s figures, with food and non-alcoholic beverages making the largest upward contribution to the CPI. Further increases to essential items could have a knock-on effect for consumer demand in other areas.
“Inflation is set to continue upwards, with a further rise in the energy price cap yet to come, leaving businesses with mounting economic uncertainty, alongside labour shortages. One immediate measure to reduce the pressure on firms would be to cut VAT on business energy bills to 5%.
“This inflationary surge sits alongside a poor economic outlook and unless the Government acts with urgency to encourage businesses to invest, the chances of a recession will only increase.”
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