There is mounting evidence that consumers are facing hikes to bills on many fronts after Next became the latest to warn of price rises ahead.
The homewares to fashion retailer said it was to implement an “unwelcome” 1% rise to prices this year to help it cover off an anticipated £67m rise to its wage bills.
It blamed the changes to employer National Insurance contributions, announced in the budget, that are due to take effect in April.
The announcement by the chain, which also sounded caution around the 2025 economy, is the latest evidence of rising cost pressures facing both households and businesses.
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While corporate lobby groups have united behind a core message of price hike threats to offset budget costs, analysis by Sky News has shown there is a threat of bigger than expected hikes to energy bills from April due to low gas storage levels across Europe.
Consumers are also facing inflation-busting rises to water bills and council tax.
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Sky News reported last week that the combined energy, water and council tax hit, from April, would amount to £270.
New data from Kantar Worldpanel released on Tuesday showed grocery inflation running at an annual rate of 3.7% last month.
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That was its highest level since March last year and achieved despite steep discounting by stores to lock in customer loyalty ahead of the core Christmas shopping period.
The report showed that prices were rising fastest in chilled smoothies & juices, chocolate confectionery and skincare.
The current rate of inflation, at 2.6%, is far below the peak above 11% witnessed in the wake of the energy-driven cost of living crisis that followed Russia’s invasion of Ukraine in early 2022.
But the anticipated pace of interest rate cuts has come in slower than initially expected due to sticky elements, such as services inflation, preventing the Bank from cutting borrowing costs.
Economists see rate of inflation hovering closer to 3% during 2025, reducing the chances of Bank rate coming down from the current 4.75% level.
Higher interest rates leave the cost of home loans elevated, exacerbating the feeling among millions of households that the cost of living crisis remains in full swing.
Prices, overall, have not fallen. They are just rising at a slower annual pace.
Businesses have warned that the effects of the budget are not only likely to raise prices but hit employment, wages and investment too.
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In its Christmas trading update, Next said of its outlook for the year ahead: “We believe that UK growth is likely to slow, as employer tax increases, and their potential impact on prices and employment, begin to filter through into the economy.”
Data on Monday suggested that manufacturing and services firms shed jobs at the fastest pace since January 2021 last month.
A Treasury spokesperson said in response: “We delivered a once in a parliament budget to wipe the slate clean and deliver the stability businesses so desperately need.
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“We have ensured more than half of employers will either see a cut or no change in their National Insurance bills, and by capping the rate of corporation tax at the lowest level in the G7, creating pension megafunds and establishing a National Wealth Fund, we are bringing back political and financial stability, creating the conditions for economic growth through investment and reform.
“This is just the start of our Plan for Change which will unlock investment, get Britain building via planning reform, and employ a modern Industrial Strategy to deliver the certainty and stability businesses need to invest in the UK’s growing and high potential sectors. This will make all parts of the country better off.”
