UK inflation rate rises to highest level in nearly four years

The UK’s inflation rate as measured by the Consumer Prices Index (CPI) rose to 2.9% in May, up from 2.7% in April, data published by the Office for National Statistics (ONS) has revealed.

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The rising costs of package holidays and imported computer games helped to push the rate to its current level. The ONS found that food and clothing prices also rose, but fuel prices fell.

Economists had previously predicted that the rate of inflation would remain at 2.7% in May.

Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), commented: ‘Higher inflation is a key business concern as it squeezes margins and weakens their ability to invest, particularly during this time of heightened political uncertainty.

‘A key focus of the new government must therefore be on easing the current pressure on firms’ cost base by tackling the burden of upfront costs and taxes associated with doing business in the UK.’

Meanwhile, the Trades Union Congress (TUC) expressed concerns that the UK’s rising inflation rate ‘continues to far outstrip wage growth’.

Frances O’Grady, General Secretary of the TUC, warned: ‘The election showed that working people are struggling. The new government must stop the real wage slide. Ministers must focus on delivering better-paid jobs all around the UK.’

UK economic growth ‘weakest in Europe’ during first quarter of 2017, data suggests

The UK economy experienced the weakest rate of growth in the EU during the first quarter of this year, figures published by European statistics agency Eurostat have suggested.

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Britain’s economy grew by just 0.2% in the three months to March – a significant fall from the rate of 0.7% recorded during the last quarter of 2016.

Experts believe that Brexit was partly to blame for the UK’s low economic growth rate, alongside rising prices due to lower sterling.

The data also revealed that growth for the EU as a whole totalled 0.6% in the first quarter of 2017. It found that the French economy grew by 0.4%, whilst German economic growth rose by 0.6%.

Economists expect Britain’s Gross Domestic Product (GDP) rate to rise slightly in the coming months.

The UK economy is set to grow by 1.6% by the end of 2017, as predicted by the Organisation for Economic Co-operation and Development (OECD). However, the OECD also expects UK economic growth to fall to 1% during 2018, as Brexit looms.

Business confidence has ‘fallen dramatically’ since General Election, IoD suggests

A snap poll carried out by the Institute of Directors (IoD) has found that, following the General Election and the subsequent Hung Parliament, business confidence in the UK economy has ‘fallen dramatically’.

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The poll of 700 IoD members revealed that businesses require ‘rapid agreement’ on transitional arrangements that arise from Brexit talks, alongside clarity as to whether EU nationals already residing in the UK will be permitted to remain in the country following Brexit.

Businesses also have ‘no desire’ for another election this year, the poll suggested.

The IoD has called for the government’s main priority to be striking a new trade deal with the EU.

It also warned that political uncertainty generated by the election could have ‘disastrous’ consequences for the UK economy.

Stephen Martin, Director General of the IoD, said: ‘The needs of business and the discussion of the economy were largely absent from the [General Election] campaign, but this crash in confidence shows how urgently that must change in the new government.’

Business groups react to General Election result

With the 2017 General Election resulting in a Hung Parliament, the UK’s leading business groups have been giving their reactions.

The Institute of Directors (IoD) has warned that businesses have now been ‘thrown into political limbo’.

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The Confederation of British Industry (CBI) is urging politicians to form a functioning government which offers security and places the economy at the heart of its agenda.

CBI Director-General Carolyn Fairbairn said:

‘For the next government, the need and opportunity to deliver an open, competitive and fair post-Brexit economy that works for everyone across all our nations and regions has never been more important.’

Meanwhile, the Federation of Small Businesses (FSB) has called for a delay to the beginning of Brexit talks.

FSB National Chairman Mike Cherry said:

‘It is important to go into the Brexit talks from a position of strength, focused on getting the best deal possible for trade and access to workers and skills. Negotiations should be led by a government and a Prime Minister that will be in place for the duration, and so we call for a delay to the scheduled start of negotiations rather than a rush to begin in 11 days’ time. The need for a transition period now becomes even stronger, providing the time to get Brexit right.’

The British Chambers of Commerce (BCC) also emphasised the ongoing uncertainty for business communities, and echoed the FSB‘s call for a delay to Brexit negotiations.

Dr Adam Marshall, BCC Director General, said:

‘Whilst companies have for many months done their best to screen out political noise in order to focus on their own operations, this result will prove much harder for UK businesses to ignore.

‘No business would walk into a negotiation without clear objectives, an agreed starting position, and a strong negotiating team. It is hard to see how Brexit negotiations could begin without answers on these important questions.’

Business calls for support as UK voters head for the polls

Following weeks of heated political debate, the UK is heading for the polls to vote in Theresa May’s snap General Election.

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In the run-up to the election, business groups urged politicians not to allow Brexit to overshadow other important domestic issues, including boosting UK competitiveness, improving infrastructure and encouraging local growth.

Business leaders have called for the incoming government to provide an environment which supports and encourages small businesses, and a tax system that works for businesses of all sizes.

While aspects of foreign policy and social care have dominated many of the arguments, the main parties have set out their key plans on tax, infrastructure, immigration and investment.

Around 46.9 million people have registered to vote for the 650 seats at Westminster, with any one party requiring 326 seats in order to form a majority in the House of Commons.

First cash-only Lifetime ISA enters the market

The first cash-only Lifetime ISA is being launched this week, allowing adults under the age of 40 to put aside cash sums in order to save for their first home or their future retirement.

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The Lifetime ISA was introduced in April, but initially only share-based investments were available. The Skipton Building Society is now offering the first cash Lifetime ISA, with an interest rate of 0.5%.

Under the scheme, savers aged between 18 and 39 can invest up to £4,000 a year and will receive a 25% bonus on contributions from the government up until their 50th birthday.

Funds can be used to buy a first home at any time from 12 months after opening the account, and can be withdrawn from the age of 60, tax-free.

The savings and bonus can be used towards a deposit on a first home worth up to £450,000.

However, where the funds are withdrawn before the age of 60 the account holder will lose the government bonus (plus any interest or growth on this) and will be liable to pay a 5% surcharge.

Survey reveals slowdown in retail sales

Retail sales fell by 4.4% last month, according to the latest figures from the British Retail Consortium (BRC).

The May figures represent the biggest drop in more than four years, as consumers feel the effects of rising inflation and weak wage growth.

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Online sales of non-food items also grew at the slowest rate since records first began in 2012.

Meanwhile, a separate survey conducted by Barclaycard has suggested that consumer confidence reached a new low last month, with 53% of consumers reporting that they feel confident about their finances, compared with 70% in March.

According to the survey, growth in consumer spending fell to 2.8% in May, with spending on households goods and clothing falling by 2.9% when compared to the previous year, although spending on cinemas and eating out rose by 11.5% and 11.7% respectively.