Consumer prices: UK inflation hits 10 percent mark

Consumer prices, which have already risen sharply, have jumped again in Great Britain. Inflation climbed to 10.1 percent in July, the highest rate since records began 25 years ago, the national statistics office ONS said on Wednesday. According to a retrospective calculation by the ONS, the last time inflation was higher was in 1982. The increase even tops the expectations of experts: on average, analysts had only expected an increase from 9.4 to 9.8 percent.

Unusual price increase in July

A wide range of price increases led to this record, said ONS chief economist Grant Fitzner. “Food prices have risen sharply, especially baked goods, dairy products, meat and vegetables.” Compared to June, prices increased again in July by 0.6 percent. This is actually atypical, says Fitzner, since in July many discount offers in the shopping streets usually lead to falling inflation. In a month-on-month comparison, clothes and shoes actually became cheaper this time as well. However, the prices for food and transport costs increased even more.

Rising energy prices are responsible for around half of the increase, explained Fitzner. However, the price explosion in this sector will only have a full impact in the autumn, when energy prices, which are currently still regulated by a price cap in Great Britain, will rise significantly.

Poor households are hit harder

Since every household needs bread and electricity, poorer households are hit harder when prices for such everyday goods soar. The Institute for Fiscal Studies has calculated that for the poorest fifth of British households, inflation could even rise to around 18 percent because they spend most of their money on food and energy.

However, Ulrich Hoppe, Director of the German-British Chamber of Industry and Commerce, sees another reason: higher earners in office jobs would save additional costs for train tickets or fuel by working more from home, while others who have to be physically on site suffer from rising transport costs. “It’s a question of justice,” says Hoppe in an interview with the German Press Agency.

No relaxation in sight

But there is no relief in sight for anyone: Since the price cap for energy prices will rise significantly in the autumn quarter, official estimates assume that consumer prices could exceed the 13 percent mark in the autumn. The doctoral student Rebecca Brown, for example, does not yet know how she will then be able to cover her expenses. “I really don’t know what we’re going to do then,” Brown told the BBC.

There is growing pressure on politicians to take decisive countermeasures. Finance Minister Nadhim Zahawi declared the fight against inflation to be a “top priority” on Wednesday, but in fact he and outgoing Prime Minister Boris Johnson do not want to make any major decisions until the change of government in early September. Rishi Sunak, one of the two remaining candidates to succeed Johnson, has already promised relief packages. But the favorite for the top job is Secretary of State Liz Truss, who despite all warnings wants to push through tax cuts in hopes of controlling inflation. So far, the 47-year-old has not wanted to commit to relief payments.

Interest rate hikes against high inflation

The Bank of England has been fighting high inflation for some time by raising interest rates. It has raised its key interest rate several times since November, most recently to 1.75 percent. The Bank is expected to continue on this course.

The “Financial Times” attributes the fact that prices in the United Kingdom are rising even more sharply than in other G7 countries to the fact that British companies are passing on the price increases more directly to customers who were significantly more willing to spend last year than before and who private sector wage increases of more than 5 percent.

With the public sector lagging far behind in wage increases, dissatisfaction is growing there. There are signs of a wave of strikes that could grow into the largest since the 1970s. Meanwhile, employees in rail transport have stopped work several times this summer, and the workforce at container ports, post and telecoms want to follow shortly.