The UK rate of inflation has hit its highest level in eight months, rising to 2.6% in the year to November.
The Office for National Statistics said that increases in fuel, clothing and concert ticket prices had played a part in the rise, which was the fastest rate of increase since March.
The increase was in line with Bank of England forecasts, but has led to calls for the Bank to cut interest rates to boost growth tomorrow (19 December).
TUC general secretary Paul Nowak said the last year had seen inflation come back to target faster than expected, meaning families and businesses remain under pressure.
“The latest GDP and employment figures show the economy is still fragile and the priority must be turning this around.
“So, it’s vital the Bank of England keeps moving and makes another interest rate cut tomorrow.
“The government’s plan to invest in our broken economy is important – but they can’t do it on their own,” he said.
Chancellor Rachel Reeves said she was “fighting to put more money in the pockets of working people”, and that she recognised families were struggling with the cost of living.
The 2.6% rise was in the consumer prices index (CPI) measure of inflation, but the retail prices index (RPI) – a wider measure – rose to 3.6% from 3.4%.
Earlier this week the ONS revealed that regular pay grew at an annual rate of 5.2% between August and October, meaning wages are rising faster than prices.
Private sector pay grew at a rate of 5.4%, it said, while public sector wages increased at a rate of 4.3%.
Pay analysts at Brightmine echoed these findings, concluding that median basic pay rises for 2024 settled at 4.5%, down from 6% in 2023. Pay freezes accounted for 2.6% of awards.
Sheila Attwood, senior content manager for data and HR insights at Brightmine, said the rise in employer national insurance contributions and national minimum wage were contributing to “a squeezed budget which could significantly affect the pay awards that employees are given next year”.
Four in 10 respondents to a recent Brightmine survey said they would reduce their budget for salary reviews in response to the Autumn budget.
Also looking forward to 2025, the CIPD said employers would need more support to prevent job losses as the cost of business soars.
James Cockett, senior labour market economist at the HR body, said: “Employers face tough waters ahead with rising employment costs as a result of the Budget, compounded with a raft of changes in the Employment Rights Bill.
“The uncertainty around the details of the Bill means it will be a precarious start to 2025 for many employers.”
Cockett said the levers employers could pull would be limited due to rising costs, and urged the government to consider smaller businesses in particular, who “are likely to be disproportionately affected by the cumulative impact of these changes, and require more support, advice and guidance in implementing many of the proposals”.
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