UK Inflation Hits 40-Year High, Squeezing Household Budgets and Businesses

The UK inflation rate hit a 40-year high of 11.1% in October 2023, according to the Office for National Statistics (ONS). This is the highest inflation rate since 1981.
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The rise in inflation is being driven by a number of factors, including the rising cost of energy, food, and fuel. The war in Ukraine has also contributed to inflation, as it has disrupted supply chains and pushed up the price of commodities.

The high inflation rate is squeezing household budgets and businesses. Many households are struggling to make ends meet, and businesses are facing higher costs.

Impact on household budgets

The high inflation rate is having a significant impact on household budgets. Many households are struggling to afford the rising cost of living.
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A recent survey by the Resolution Foundation found that one in four households is now experiencing financial hardship. This is the highest level of hardship since 2014.

The high inflation rate is also having a disproportionate impact on low-income households. Low-income households spend a larger proportion of their income on essentials such as food and energy, so they are more affected by rising prices.

Impact on businesses

The high inflation rate is also having a negative impact on businesses. Businesses are facing higher costs, such as the cost of energy, raw materials, and labor.
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Business owner looking at rising energy bills

The high inflation rate is also making it difficult for businesses to pass on costs to consumers. This is because consumers are also facing rising prices, and they are less likely to spend money if businesses raise prices.

What the government is doing

The UK government has announced a number of measures to help households and businesses cope with the high inflation rate. These measures include:

A £15 billion package of support for households, including a £650 payment to low-income households and a £400 discount on energy bills.
A £1 billion package of support for businesses, including a cut in fuel duty and an increase in the employment allowance.
What the future holds

It is difficult to say when inflation will peak and start to come down. However, economists expect inflation to remain high for some time.

The UK economy is expected to slow down in the coming months, as consumers and businesses cut back on spending. This could lead to a recession, which would have a further negative impact on household budgets and businesses.

Conclusion

The UK inflation rate has hit a 40-year high, squeezing household budgets and businesses. The government has announced a number of measures to help households and businesses cope with the high inflation rate, but it is unclear when inflation will peak and start to come down.