Inflation climbs to 1.6% – reaction

Following news from the ONS this morning that the UK inflation rate climbed to 1.6% in April, Ano Kuhanathan, sector advisor at Euler Hermes, said: “We currently estimate pent-up demand could benefit the UK economy by £58bn (€68 billion) in 2021. Inflation creeping back up to pre-pandemic levels is unlikely to set many alarm bells ringing for now. That said, businesses will be alive to the more significant inflationary shifts and subsequent opportunities to increase prices that could materialise in the coming months, should post-lockdown consumer spending maintain pace.

“Most sectors are experiencing some degree of pricing pressure from rising material costs – stimulated in large part by the ongoing impact of Covid restrictions as well as Brexit-related import challenges at a time when consumer demand is surging. Labour shortages are also likely to contribute to wages growing by 2.5% this year. However, even those looking to make up for a dire 2020 will be wary of passing those costs on to spend-happy consumers for the time being as they look to establish or rebuild their market share in the new world order.”