The Government has got to take more action to stop the UK economy going into a recession as inflation continues to rise, according to the boss of one of the UK’s biggest Chambers of Commerce.
Scott Knowles, chief executive of East Midlands Chamber, echoed what many others have said, urging the PM and Chancellor to do more to protect industry and families facing growing hardship.
It comes after the Office for National Statistics reported that inflation was at 9 per cent in the 12 months to April, up from 7% in March – the highest it has been for 40 years. Many have called on the Government to bring in an emergency budget to help.
Mr Knowles said: “The 2 per cent jump in inflation between March and April is eye-watering, and underscores the growing cost of living crisis facing households, and the damaging squeeze on firms' ability to invest and operate at full capacity.
“The marked acceleration in the headline rate in April reflected the energy price cap rise, increase in national insurance contributions and the reversal of the VAT reduction for hospitality in the month.
“These added to the already-escalating cost increases for energy, people and raw materials, which resulted in two-thirds of East Midlands businesses telling us in our Quarterly Economic Survey for Q1 2022* that they expected being forced to increase their own prices in the following three months.
“The scale at which inflation is damaging key drivers of UK output, including consumer spending and business investment decisions – with cashflow falling for a net 3 per cent of our region’s firms, it led to a 2 per cent decline in investment intentions for plant and machinery in the first quarter of this year – is unprecedented.
“After confirmation that GDP shrank by 0.1 per cent in March, this means there is a chance the UK will be in recession by the third quarter of the year – unless Government pulls all the levers available to it in order to alleviate the cost of doing business and the cost of living crises, which are essentially two sides of the same coin.
“While inflation may moderate a little over the summer, April’s inflationary surge is likely be surpassed in October as the expected energy price cap rise in the month lifts inflation above 10 per cent.
“Soaring inflation means a June interest rate rise is inevitable. However, higher interest rates will do little to address the global factors driving this inflationary surge, and risks undermining confidence and aggravating the financial squeeze on consumers and businesses.
“Although surging global energy and commodity prices aren’t typically something in the UK Government’s direct control, more needs to be done to help consumers and businesses through this difficult period.
“This should include reversing the rise in national insurance contributions and cutting VAT on business energy bills to 5 per cent.”
