UK inflation soared to 9% in April – its highest level for more than 40 years – as the rising cost of gas and electricity pushed household energy bills to record levels.

The escalating cost of food and transport also contributed to the rising cost of living, deepening the crisis affecting millions of low- and middle-income families.

Business groups said all sectors of industry and commerce were suffering from the steep rise in energy and fuel costs, with many facing a similar shock to their finances as seen during the pandemic but without the same level of government support.

The Office for National Statistics said the 54% increase in the energy price cap in April, which took the average annual gas and electricity bill close to £2,000, was the main reason for the jump in the consumer prices index from 7% in March.

Average petrol prices rose to a record 161.8p a litre in April 2022 from 125.5p a year earlier. Diesel was another factor behind the increase in the consumer prices index from 7% in February after the average cost at the pumps hit a record high of 176.1p a litre, leading to an average increase over the last 12 months in motor fuels of 31.4%.

Interactive

The end of a temporary VAT cut for the hospitality industry also pushed up prices after restaurants and hotels said they were unable to cushion customers from the increase in the tax from 12.5% to 20%.

A steep fall in the value of the pound on foreign exchange markets piled further pressure on businesses by adding to the cost of imports. Sterling has slumped since last month, from more than $1.30 to $1.24 after hitting $1.22 last week.

Food banks have reported an increase in demand for food packages after the rise in energy bills, while many small business owners have said a combination of higher costs and tax increases have pushed them to the edge of bankruptcy.

Figures from the Resolution Foundation showed the poorest tenth of households faced an inflation rate of 10.2% in April, significantly higher than the 8.7% affecting the top 10% of earners. The Institute for Fiscal Studies thinktank suggested the inflation rate experienced by the poorest households could be closer to 11%.

Predictions that high inflation and a shortage of skilled workers have already begun to push the UK economy into recession are expected to add further pressure on the chancellor, Rishi Sunak, to offer further support to households and businesses.

Bank of England policymakers are expected to react to the figures at their meeting in June by increasing interest rates for the fourth time since last December to 1.25%.

However, opinions are divided over how much further the central bank will go to drive up borrowing costs should the economy contract in the summer and autumn. James Smith, an economist at ING, said it was likely the bank would raise rates twice before pausing.

Labour said it was “unconscionable” that Sunak was refusing to tax the fossil fuel industry to fund extra measures for poorer households. Conservative MPs voted on Tuesday night against a Labour motion for a windfall tax on North Sea oil and gas firms that could generate about £3bn.

The opposition will table another amendment in parliament on Wednesday to put pressure on Boris Johnson to commit to an emergency budget addressing the cost of living crisis.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

The British Chambers of Commerce has also called for the chancellor to hold an emergency mini-budget. Suren Thiru, the head of economics at the BCC, said: “The scale at which inflation is damaging key drivers of UK output, including consumer spending and business investment, is unprecedented and means there is a real chance the UK will be in recession by the third quarter of the year.”

Sunak has indicated he may offer further measures to boost the incomes of those on the lowest pay, although it is understood the cabinet is split over how to fund the billions of pounds that campaigners say are needed in extra subsidies or welfare payments, with some favouring a windfall tax on oil and gas companies.

Labour market figures released on Tuesday showed that average total wages increased by 7% in March, pushed up by bonus payments to staff and consultants working in the finance, IT, construction and professional services sectors.

Interactive

However, income growth has not been evenly distributed. The average pay rise without bonuses was only 4.2%, hitting millions of workers with a fifth consecutive month of falling real wages.

Contributor

Phillip Inman

The GuardianTramp

Related Content

Article image
Britons 'face expensive Christmas dinner' as food price inflation soars
Official figures show prices were up by 4.2% last month on 12 months earlier, the highest level in four years

Larry Elliott Economics editor

14, Nov, 2017 @6:59 PM

Article image
‘Golden era’ of cheap food over as two in five Britons buy less to eat
ONS survey reveals worsening effects of cost of living crisis, with food prices forecast to have risen by 9% in April

Zoe Wood, Sarah Butler and Kalyeena Makortoff

13, May, 2022 @6:04 PM

Article image
Warnings over rising food prices as UK inflation hits near two-year high of 1%
Rising petrol and clothing prices drive increase in cost of living, with falling pound starting to make imports more expensive

Phillip Inman, Sarah Butler and Larry Elliott

18, Oct, 2016 @11:43 AM

Article image
UK inflation hits six-month high as petrol and energy prices rise
TUC says jump to 1.8% would put squeeze on living standards at time of falling wage growth

Phillip Inman

19, Feb, 2020 @7:21 PM

Article image
UK inflation eases to 10.7% as annual rate of price increases slows
Drop in consumer prices index had been forecast but costs continue to rise, adding to pressure on ministers to raise pay

Phillip Inman

14, Dec, 2022 @7:01 AM

Article image
UK inflation hits fresh 40-year high of 9.4% and ‘could hit 12% in October’
May’s 9.1% figure exceeds analysts’ expectations, with some saying Bank’s 11% autumn forecast is low

Larry Elliott Economics editor

20, Jul, 2022 @3:59 PM

Article image
Inflation hits 7% in March as Britain’s cost of living soars
Latest rise in CPI measure is highest in three decades, coming a month after it hit 6.2%

Richard Partington Economics correspondent

13, Apr, 2022 @6:05 AM

Article image
Inflation dips to 2.7% as impact of Brexit vote starts to fade
Cost of living squeeze eases after a small fall in both petrol and food prices, says ONS

Richard Partington

20, Mar, 2018 @10:34 AM

Article image
UK inflation hits two-year high of 1.6%
Air fares, imported raw materials, food and petrol price rises plus Brexit-fuelled fall in pound will squeeze family finances in 2017

Katie Allen

17, Jan, 2017 @10:13 AM

Article image
UK inflation hits 10.1%, driven by soaring food and fuel prices
ONS July figure is only fourth time in 70 years that inflation has breached 10%

Richard Partington Economics correspondent

17, Aug, 2022 @6:45 AM