New data from the Office for National Statistics (ONS) shows that the Consumer Price Index (CPI) rose to 10.1% in the twelve months to July, up from 9.4% in June. With the October energy price cap rise fast approaching and real wages failing to keep pace with inflation.
With the real value of wages falling at the fastest rate in two decades, the Money Advice Trust is calling for urgent support for people on low incomes most severely affected by rising costs.
More than a third (34 percent) of people contacting the charity’s National Debtline service now have debts that are a direct result of their income being too low to meet their basic needs.
Jane Tully, Director of External Affairs and Partnerships at the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said “Inflation is already far outstripping the real value of wages, and with energy prices set to skyrocket in autumn, a difficult situation is set to get far harder for millions of people.”
“For many, especially people on low incomes, budgets simply can’t stretch any further. Additional support is needed urgently and before even more people are faced with impossible choices trying to cover essential costs, including food, rent, energy and council tax.”
“The government needs to step in now to target support for those most in need. This should include significantly raising benefits, and additional direct help to households hardest hit so that they can afford energy bills this winter.”
StepChange is warning that more help from government will be needed for those on low incomes responding to the ONS’ data, Phil Andrew, CEO of StepChange Debt Charity said “The burden of spiralling inflation is weighing heavier on household finances with each passing month – the cost of living is now the number one reason for new StepChange clients’ debts. The next Prime Minister’s first priority upon entering office next month must be to ensure that those on the lowest incomes are thrown a lifeline to cope with these rising costs.”
“Bringing the uprating of benefits forward from April 2023 to September would be a welcome way to begin to support the most financially vulnerable, as would bringing in a new targeted financial package that matches the scale of the projected October price cap rise. We would also like to see a commitment to pausing unaffordable government debt deductions, which are already a cause of major hardship.”
“Months of rampant inflation will have left many low income households staring down the barrel of debt and destitution. A clear and ambitious set of measures to save them this from this fate is needed, and fast.”
Federation of Small Businesses (FSB) National Chair Martin McTague said “We’re seeing a toxic cocktail of rampant inflation, high taxes, soaring energy costs and shrinking economic growth. Action is needed right now.”
“While the consumer prices rate of inflation bursting through 10% is eye-watering, producer input prices are up by more than double that figure and this will filter through, pushing up the cost of living even more. The cost of living crisis can’t be solved without addressing the cost of doing business crisis.”
“That’s why we need to see a reversal of the hike in National Insurance, a cut in VAT and fuel duty, and help for struggling small firms on energy bills to match that being given to households. The rise in food and non-alcoholic drink prices contributed strongly to the growth in the consumer inflation rate, hitting across the board – we all need to eat.”
“Hospitality businesses are also feeling the pinch – from the B&B owner who now has to pay 50p per slice of bacon to the bar which has seen prices for mixers and soft drinks spiral. While small businesses do their absolute best to offer good value to customers, they will be squeezed to the margins as consumers’ disposable spending falls.”
FSB research sets out the effect the current economic climate is having on small businesses, with more small firms reporting a decline in revenues in Q2 than an increase (40.7% against 34.8%). Expectations for any betterment in performance in Q3 are similarly subdued, with those predicting a fall in revenue (35.8%) outnumbering those who predict an increase (32.4%). McTague continued “Reports from members of four- or five-fold – or even higher – increases in their energy bills are coming in thick and fast, with relief on this front also desperately needed. The new figures small firms are being quoted for energy costs would be laughable if their potential effect on the business were not so serious – these are huge, unmanageable sums for businesses whose margins have been battered and whose reserves have been depleted by the disruption to trading caused by the pandemic.”
“With so many small business on the brink as inflation runs ahead of their ability to keep up, the time is now for the Government to act to prevent the loss of even more businesses.”
Tommaso Aquilante, Associate Director of Economic Research at Dun & Bradstreet said “Recent months have seen a rapid decline in the UK’s economic outlook, with rising inflation and energy prices contributing to dimming economic prospects. The ongoing Ukraine-Russia conflict continues to affect companies and governments throughout Europe, at a moment when raising interest rates start to put pressure on public finances.”
“Looking underneath today’s 10.1% headline figure, one can see that inflation is widespread across the different sectors of the UK economy, with the majority of product divisions considered by ONS contributing to increase prices, albeit at different extents. With producer price inflation (PPI) still rising, and the energy price cap expected to climb once again in October, the Bank of England will likely tighten monetary policy further at the coming meeting of the Monetary Policy Committee.”
“Soaring inflation, higher interest rates and political uncertainty increase volatility in exchange rates. Businesses that trade worldwide or utilise foreign suppliers may need to reassess financial risks, not least those induced by spikes in the GBP/USD or GBP/EUR exchange rates. Using multiple currencies can help, but a strategy aimed at minimising currency risks will have spotted them both upstream and downstream. This is where data can provide firms with an informational advantage. After all, data is information on a phenomenon or business of interest. As such it can provide a fuller picture of a business’s suppliers and (potential) customers so they can spot cash flow problems and help the company make decisions.”