Credit, Collections & Insolvency News
Latest Office for National Statistics (ONS) data showed that inflation increased to 4% in December up from to 3.9% in November.
The rise in inflation is attributed to tobacco and alcohol prices increasing. These prices were up 12.9% in December compared to the month before, with tobacco prices rising due to recent tax hikes on the product.
Further findings released by the charity National Debtline show the impact of the recent period of high prices on household budgets and the emotional toll money worries continue to have on people in debt showing that 4.7 million (9%) adults started 2024 very worried and feeling unable to cope because of their finances.
Nearly one in two (47%) UK adults are worried about their finances this January. Whilst one in eight (13%) people in debt are scared to open mail due to their finances.
David Cheadle, acting Chief Executive of the Money Advice Trust, the charity that runs National Debtline, saidc“This surprise rise in inflation will only add to the strain felt by millions of people who are starting the year already under pressure.
“Our findings show that 4.7 million people are feeling very worried and unable to cope because of their finances. With energy arrears at record levels and the sustained impact of high costs continuing to be felt, these remain incredibly challenging times for the millions of people trapped in debt.
“For households facing unaffordable energy arrears, urgent support is needed. The Government must act by bringing in a temporary Help to Repay scheme via payment matching and write off.”
Sarah Coles, Head of Personal Finance, Hargreaves Lansdown said “This bounce in inflation isn’t a massive movement, and isn’t dramatically different to the forecasts, but it’s a surprise, and the markets really don’t like surprises. It’s a salient reminder that inflation is likely to trend downwards from here, but not particularly fast, and with plenty of bumps along the way.
“It’s horrible news for those who have been struggling for so long now. The new HL Savings & Resilience Barometer shows the cost of living has increased 18.4% in the past two years. Those whose budgets are on a knife edge are holding their breath for a slowing of inflation, so the fact it’s proving stubborn will be a bitter blow.
“Cigarettes and alcohol were our undoing, up 12.9% in a year. The price rise owes an awful lot to the rise in tobacco duty, which meant tobacco prices were up 16%. Alcohol played its part too, as our festive tipples were slightly cheaper in December – but the previous year they had been discounted even further.
“There was also a small rise in the inflation rate of recreation and culture. This tends to be fairly wayward, because it owes a lot to the price points of the best-sellers – including computer games – which can vary enormously from one month to the next.
“The holiday booking season also saw a bump in the price of air fares. They always rise at this point in the year, as seats start to go, but this year they rose more than last. Used car prices were also on their way down again. They’re now down 8.4% in a year, as the pandemic boost meant an awful lot of people have a new used car, so demand has fallen away. It meant that although petrol prices fell an impressive 8% in a year and diesel was down 15.5%, the annual drop in transport costs wasn’t as big as it had been the previous month.
“A real positive is that the inflation rate of food and non-alcoholic drink eased again slightly. Of course, this is very different from prices actually coming down, and they’re still up 8% in a year and 26% over two years. However, the rate has eased for nine consecutive months, bringing us down from the painful high of 19.2% back in March.
“We always knew inflation doesn’t rise and fall in straight lines, but this demonstrates that the path is going to be bumpy. The trend is likely to be downwards, especially with the World Bank expecting global growth to slow, and given the fact that the UK economy is already flirting with recession. However, there are likely to be more knocks on the way, with conflict in the Red Sea raising the risk of supply shortages, which could feed into higher prices. There’s the risk this could end up throwing a real spanner in the works.
“The market had been predicting a rate cut as soon as May, we’ll have to see whether this surprise rise in inflation prompts something of a rethink. The Bank of England has continued to emphasise that interest rates will stay as high as they have to for as long as is needed, so we could see this pushed back a little.”
