The chief of the influential business group the Confederation of British Industry (CBI) has warned that inflation is “very real” and is threatening to squeeze British firms.
Speaking at the CBI’s annual conference, the group’s director general Tony Danker warned that pay hikes will “spill over” into prices, intensifying the cost of living crisis pinching Brits across the country.
His remarks come as latest data from the Office for National Statistics (ONS) released last week show inflation is at its highest level in nearly a decade, scaling to 4.2 per cent in October from 3.1 per cent in September.
There are concerns that inflation may become more entrenched in the UK economy if workers begin demanding higher pay, prompting businesses to hike prices to offset margin pressure.
Households are being squeezed by underlying wage growth not keeping pace with inflation. Looming tax hikes will also hit Brits’ real incomes.
The Bank of England, and other central banks around the world, have bet on the recent bout of price rises as being “transitory” and expect inflation to revert back to trend as pressure on supply chains eases.
However, Danker was less optimistic than officials on Threadneedle Street in his inflation assessment.
“Most businesses I speak to see inflation as being a fact of life for the next year or two,” he said.
The Bank held rates at a record low 0.1 per cent this month despite forecasting inflation will hit five per cent next spring.
Governor Andrew Bailey expressed his agitation toward the near-decade high inflation print this month in response to a grilling by MPs, saying he was “very uneasy” at the pace of price rises in the UK.