Inflation jumps to 3.5% after April cost hikes – Daily Business

National insurance rises contributed to pressures on businesses

Inflation jumped to 3.5% in the year to April, up from 2.6% in March, according to the Office for National Statistics.

The sharp increase had been expected after April’s rise in the National Minimum Wage and the National Living Wage, together with other increases in water, electricity and gas prices.

Attention will focus on the next move by the Bank of England which reduced interest rates from 4.5% to 4.25% on 8 May. That was the fourth cut since a year ago, when the rate stood at 5.25% – a 16-year high.

Martin Sartorius, principal economist at the CBI, said:  “April’s rise in inflation was widely expected, driven by a perfect storm of price pressures such as higher employer National Insurance contributions, the National Living Wage increase, and a hike in the Ofgem price cap.  

“Looking ahead, the Bank of England expects that inflation will stay above 3% this year, as these pressures continue to impact households’ cost of living.

“This suggests that the Monetary Policy Committee is likely to hold rates in its next meeting, especially after May’s finely balanced decision to cut. Beyond then, the MPC will reduce borrowing costs at a gradual pace, as it assesses how price pressures are developing in the economy.”

George Holmes, managing director of Aurora Capital, described the rise in prices as a setback for businesses hoping for stability.

“It reinforces the message from the Bank of England’s chief economist earlier this week that rate cuts may be happening too quickly, and will likely put pressure on the Bank to slow things down.

“For small firms, this means more uncertainty. Demand is already fragile, and this latest inflation jump could squeeze consumer spending further.”

Analysts note that wholesale energy and commodity prices are coming down on global markets. Oil prices in particular have fallen as concerns about the world economy intensified after President Trump unveiled his tariff plans.

While business costs will rise, new figures show fall in company insolvencies registered in Scotland during April to 101 – 7% lower during the same month year-on-year.

According to the  Accountant in Bankruptcy the total number of company insolvencies was comprised of 47 company voluntary liquidations, 51 compulsory liquidations and three administrations.