A senior business figure has warned that the UK is drawing closer to a recession, as figures showed inflation soared in July.
The Consumer Prices Index (CPI) measure of inflation rose 0.6% last month to 4.4%, its highest level since records began in 1997, according to the Office for National Statistics.
But David Kern, economic adviser to employers’ group the British Chambers of Commerce, said that the economic gloom meant interest rates had to be cut. The CPI figure did not take account of recent large falls in oil prices, he added.
“Lower than expected producer prices support our view that CPI inflation will reach its peak within the next two or three months,” said Kern.
“The threats of recession are worsening. Although it is difficult for the [Bank of England’s] Monetary Policy Committee to consider rate cuts while inflation is rising, it should not hesitate to cut rates later in the autumn once it is clear inflation has peaked.”
A report by pay consultants Industrial Relations Services last month warned that employees were suffering from the largest gap between pay rises and increases in the cost of living for nearly 20 years.