The UK’s rate of inflation fell to 7.9% in the year to June while the country’s economy shrank in May, according to the latest Consumer Prices Index (CPI) published by the Office for National Statistics (ONS).

The inflation rate is currently at its lowest annual rate since March 2022, the ONS said.

Price rises have slowed by more than experts anticipated. According to the ONS, falling fuel prices helped the rate of inflation to drop, and food prices rose less quickly when compared to June 2022.

Core inflation also fell from 7.1% to 6.9%, the data showed.

Meanwhile, the UK economy contracted by 0.1% in May following growth of 0.2% in April, ONS data showed.

The rising cost of living and higher interest rates have been squeezing households and businesses, the ONS said.

It said the manufacturing, energy and construction sectors fell in May, along with sales at pubs and bars.

David Bharier, Head of Research at the British Chambers of Commerce (BCC), said the figures provide ‘further evidence of the precarious state of the UK economy’.

He added:

‘While businesses have been incredibly resilient in stomaching multiple waves of economic crises, our latest Quarterly Economic Survey shows that most firms are still not reporting improved business conditions.

‘Positively, slightly fewer businesses report inflationary pressures, but interest rates have grown as a concern for businesses. We are starting to see more businesses report rising borrowing costs, but we are yet to understand the full impact of rising interest rates.

‘Businesses are operating in a climate with a high degree of uncertainty, and government and Bank of England policy both need to be very responsive to developments.’

Internet links: ONS June inflation data ONS May GDP data BCC website

The Institute of Directors (IoD) has urged the government to create an industrial strategy to help ‘define specific long-term priorities for the UK economy’.

A survey carried out by the IoD revealed that 88% of its members favour the development of an industrial strategy. Less than 10% of IoD members think economic growth should be generated by market forces.

The survey found that firms want an industrial strategy that focuses on reinforcing the UK’s capabilities as a centre of excellence for Research and Development (R&D) and green investment.

The survey found that 58% of firms believed that the strategy should also focus on the development of skills, and 57% would like it to champion developing infrastructure.

Dr Roger Barker, Director of Policy at the IoD, said:

‘The recent priority for UK government policy has been on regaining economic and financial stability, and in laying the groundwork for the return of economic growth.

‘However, this is not enough to sustain the competitiveness of UK business. Business leaders clearly see the value of a longer-term policy framework which places innovation at its core, and which enables innovations to be commercially exploited in the UK.

‘Experience suggests that UK policymakers are ill-suited to ‘picking winners’, either in terms of companies or sectors.’

Internet link: IoD website

The Bank of England has raised UK interest rates to a 15-year high of 5% as it continues its battle against inflation.

Despite concerns that mortgage-holders face a timebomb of higher rates, the Bank’s Monetary Policy Committee (MPC) decided to raise its benchmark rate from 4.5% to 5%, an increase of half a percentage point.

It is the 13th increase in UK interest rates in a row, going back to December 2021.

Chancellor Jeremy Hunt said:

‘High inflation is a destabilising force eating into pay cheques and slowing growth.

‘Core inflation is higher in 14 EU countries and interest rates are rising around the world, but the lesson from other countries is that if you stick to your guns, you bring inflation down.

‘Our resolve to do this is watertight because it is the only long-term way to relieve pressure on families with mortgages. If we don’t act now, it will be worse later.’

Internet link: Bank of England website

Over 200 employers have been named by the government for failing to pay their lowest paid employees the minimum wage.

The 202 employers were found to have failed to pay their workers almost £5 million in a clear breach of the National Minimum Wage (NMW) law, leaving around 63,000 workers out of pocket.

Companies named and shamed range from major high street brands to small businesses and sole traders.

The businesses named have since paid back what they owe to their employees and have also been given financial penalties.

The employers named previously underpaid workers in the following ways:

• 39% of employers deducted pay from workers’ wages
• 39% of employers failed to pay workers correctly for their working time
• 21% of employers paid the incorrect apprenticeship rate.

Minister for Enterprise, Markets and Small Business, Kevin Hollinrake, said:

‘Paying the legal minimum wage is non-negotiable and all businesses, whatever their size, should know better than to short-change hard-working staff.

‘Most businesses do the right thing and look after their employees, but we’re sending a clear message to the minority who ignore the law: pay your staff properly or you’ll face the consequences.’

Internet link: GOV.UK

The UK’s rate of inflation plateaued at 8.7% in May, data published by the Office for National Statistics (ONS) has shown.

Inflation was expected to fall in May but remained at 8.7% – the same rate as was recorded in April. The rate of 8.7% is higher than economists had expected, and many now anticipate a rise in interest rates.

Experts have stated that so-called ‘core inflation’ – which excludes volatile elements such as food, fuel and energy prices – is now at its highest level in the UK for over 30 years. Many warn that the high inflation rate will have knock-on effects for mortgages.

UK inflation is higher than inflation rates in comparable countries, the data revealed: Germany recorded a rate of inflation of 6.3%; France’s rate is currently 6%; and the USA’s inflation rate is 2.7%.

Chancellor Jeremy Hunt said:

‘We need to squeeze every last drop of high inflation out of the economy.

‘Inflation is the biggest, the most invidious, tax rise the British people are facing right at the moment because it is eroding the value of their salaries – so that is our primary priority.’

Internet link: Office for National Statistics website