Why Prices Are About to Skyrocket (And Why You’ll Feel the Pinch)
Robert Salter, Director at the audit, tax, and business advisory firm Blick Rothenberg, warns that the latest wage and NIC hikes announced in Rachel Reeves’s 2024 Budget are already making their way onto grocery bags and coffee cups. The cost of living, it seems, has an extra tax‑free passenger.
Crunching the Numbers
- UK’s Consumer Price Index (CPI) climbed to 3 % for the year ending January 2025, up from 2.2 % in July 2024.
- This jump is nothing surprising to the economists who keep their eyes on the Budget; it’s the natural fallout of businesses needing to cover higher National Minimum Wage (NMW) and Employer National Insurance Contributions (NIC) starting April 2025.
- Companies are passing those costs onto shoppers—a classic case of “price transfer.”
Who Gets Hit Hard?
Think of the CPI as a snapshot of all the stuff households buy. When it rises, low‑income families feel it the most. If a kitchen gadget costs 15 p in July and 18 p by April, it adds up to a few extra pounds a month on a tight budget.
Future Price Boosts Are Coming
Some firms have already rolled out price hikes, but those that haven’t will be forced to do so in the coming weeks as wage and NIC climbs take effect.
Public Sector Pay Shock as a Wild Card
The government’s generous pay raises for public‑sector workers, made in the Autumn without noticeable efficiency gains, throw another wrench into the inflation equation. Private players feel the pressure to match those wages to attract talent—another expense that inevitably finds its way into product prices.
Bank of England – Easier to Say Than to Do
With inflation running higher than economists predicted, the Bank of England’s playbook for lowering interest rates is less clean. Robert Salter points out that this is the sort of outcome the Budget’s architects may have anticipated, but it’s still a bit of a thumbs‑down for those hoping to curb inflation.
In short, your wallet is going to feel the impact as businesses bring in higher wage costs. Keep an eye on prices, and maybe buy that cloudy coffee at a discount on a rainy morning to offset the cost spike.
