Upwards inflationary pressure is being largely driven by surging fossil fuel energy costs
Britain’s biggest business group reiterates call for major investment in home and building energy saving measures as UK inflation hits 30-year high
The Confederation of British Industry (CBI) has reiterated its calls for increased investment in green energy and building efficiency measures in order to combat rapidly rising inflation in the UK, which surged to a 30-year high last month.
Data released today by the Office for National Statistics (ONS) shows UK inflation rose to seven per cent in the year to March 2022, the highest rate of increase since 1990, as the cost of living crisis exacerbated by two years of Covid-19 disruption and Russia's invasion of Ukraine begins to bite even harder.
The inflation rate could be set for further rises throughout the year too, the CBI warned, with the latest statistics already showing a sizeable uptick from the 6.2 per cent annual average inflation rate in the year ending in February, placing further upward pressure on consumer energy costs.
Alpesh Paleja, CBI's lead economist, warned that the latest surge in inflation "will not be the last", as he called on businesses and households to brace themselves even higher costs as the year progresses.
"We'll see another jump over April, as the rise in Ofgem's energy price cap comes into effect," he said. "Beyond this, volatility in global commodity prices and ongoing supply chain disruption will continue to stoke price pressures. The result will be even higher costs for businesses, and a deep squeeze in the cost-of-living for households."
But Paleja stressed that the situation was being primarily driven by the high cost of energy, particularly fossil fuels, which underscored the urgent need to ramp up investment in cheaper, domestic sources of clean energy, as well as energy efficiency measures such as insulation.
"The energy-centric nature of inflationary pressures highlights the need to double-down on investment in green energy," he said. "Making homes and commercial buildings more energy efficient would help reduce demand and consumer bills. In the near-term, reducing policy costs for energy intensive industries and continuing support for low-income households will be essential in helping those worst hit."
The gas crisis, which has seen the global price of the fossil fuel surge over the past year, has been further exacerbated by the Kremlin's actions in Ukraine, serving to push up consumer energy bills in the UK, where households are heavily reliant on gas for heating and electricity.
Having already faced higher energy costs over the past year, consumers are set to begin feeling even greater pressure on their wallets after the Energy Price Cap rose at the start of this month, adding hundreds of pounds onto the average annual bill. The Energy Price Cap is expected to rise yet again later this year, too, with the crisis in Ukraine showing little sign of abating any time soon.
The government launched its Energy Security Strategy last week in a bid to drive down the UK's dependency on Russian oil and gas, and secure greater independence of energy sources with new enhanced targets for offshore wind, nuclear and hydrogen, thereby also cutting energy costs.
However, the strategy received widespread criticism from green business leaders, politicians and campaigners alike for the lack of significant new funding support offered, particularly for ramping up energy efficiency measures which are widely regarded as among the most effective and rapid means of driving down demand for energy use.
A number of green businesses have therefore this week called for greater support from the government for energy efficiency measures on homes and businesses in order to ease the rising burden of energy costs, and thereby serve to tackle inflation.
Chancellor of the Exchequer, Rishi Sunak, today conceded that costs could be on course to rise further this year due to "global pressures in our supply chains and energy markets which could be exacerbated further by Russian aggression in Ukraine".
"I know this is a worrying time for many families which is why we are taking action to ease the burdens by providing support worth around £22bn in this financial year, including for the most vulnerable through our Household Support fund," he said. "We're also helping as many people as possible into work - the best way for families to gain economic security in the longer term."
