Britain is at risk of a bout of stagflation as Labour’s tax hikes have pushed up inflation and killed off growth.
Bleak official figures today showed consumer price inflation climbed to a higher-than-expected 3.6 per cent in June.
It comes as the economy also suffers from disappointing growth, with data last week showing that output shrank in May for the second month in a row.
The figures fuelled fears that the UK is facing a period of stagflation – the dismal scenario in which growth stagnates as prices still climb.
Experts warned inflation will remain above 3 per cent for the rest of this year, meaning fewer interest rate cuts. The National Institute of Economic and Social Research said it does not expect inflation to return to the 2 per cent target until late next year.
Monica George Michail, an economist at the institute, said: ‘We forecast inflation to remain elevated and only fall back to the 2 per cent target on a lasting basis by late 2026.
‘We therefore expect the Bank of England to cut interest rates just one further time this year.’
In June, inflation hit its highest level since January 2024, despite expectations that it would remain flat at 3.4 per cent.
The figures came as an embarrassing blow for Chancellor Rachel Reeves less than 24 hours after her Mansion House speech
Monica George Michail said: ‘We expect the Bank of England to cut interest rates just one further time this year’
The pace of price rises has more than doubled since last September, when it was just 1.7 per cent.
And food inflation has climbed higher for the third month in a row to hit a 16-month high of 4.5 per cent.
Staples such as bread, rice and pasta were among the foods that saw a sharp price increase during the month. Meanwhile, a steep 7.9 per cent increase in air fares between May and June – a time of year when they usually go up – was the largest June rise for seven years.
The figures came as an embarrassing blow for Chancellor Rachel Reeves less than 24 hours after her Mansion House speech in the City in which she announced a series of reforms designed to boost growth and claimed to be creating ‘a Britain that is better off’.
But experts said her £25billion employer National Insurance raid is helping push up inflation as higher costs are passed on to consumers. Some warned that the menace of ‘stagflation’ was approaching.
Higher inflation will make it harder for the Bank of England to cut interest rates. However, the Bank’s worries about unemployment mean it is still likely to cut borrowing costs next month.
Meanwhile, job figures due out today threaten to add to the gloom facing the Chancellor.
Anna Leach, chief economist at the Institute of Directors, said: ‘With inflation still proving sticky and economic growth stagnating, the UK is skirting the edges of stagflation.’
Tory business spokesman Andrew Griffith (pictured) said the figures ‘show the folly of the Chancellor’s choice to hike National Insurance on businesses’ (file image)
Tory business spokesman Andrew Griffith said the figures ‘show the folly of the Chancellor’s choice to hike National Insurance on businesses rather than the more honest approach of income tax’.
He added: ‘Higher costs and rising unemployment are the price.’
Andrew Wishart, an analyst at Berenberg, also blamed the Chancellor for the state of the economy. ‘Companies passing on Government-imposed increases in their costs caused inflation to come in higher than expected in June,’ he said.
Ms Reeves said: ‘I know working people are still struggling with the cost of living.
‘There is more to do and I’m determined we deliver on our Plan for Change to put more money into people’s pockets.’
Simple eye test can predict YOUR chances of suffering a heart attack or stroke over the next decade
A simple eye test can predict a person’s risk of having a heart attack or stroke within the next ten years, a study suggests.
Researchers used artificial intelligence (AI) to analyse digital retinal photographs – images of the back of the eye that are already used to diagnose some conditions.
The technology was able to produce a personalised risk score for each patient in less than a second.
The test could one day be offered alongside blood pressure and cholesterol checks to identify more people at highest risk of disease, so they can be offered treatment earlier.
Heart experts at the University of Dundee trialled the AI software on the eye scans of people with type 2 diabetes.
Those with the condition have routine eye tests to check for diabetic retinopathy, a condition where high blood sugar levels damage the blood sugar in the retina.
Study leader Dr Ify Mordi, a research fellow at the University of Dundee and consultant cardiologist, said: ‘It may be surprising, but the eyes are a window to the heart.
‘If there is damage or narrowing of the blood vessels at the back of the eye, there is a good chance that will also be seen in the blood vessels further inside the body, supplying the heart, which could lead to a heart attack or stroke.’
A simple eye test can predict a person’s risk of having a heart attack or stroke within the next ten years
Researchers instructed the technology to initially look for warning signs on the images, such as blood vessel narrowing or blockages.
It was then permitted to look for any detail in the photographs, such as the size or arrangement of blood vessels, before being trained using 4,200 images.
The AI tool was able to predict the people who would go on to have ‘major cardiovascular events’, like heart attacks or strokes, within a decade with 70 per cent accuracy.
Dr Mordi, whose findings are published in the journal Cardiovascular Diabetology, added: ‘This is a one-stop scan which is routinely performed and takes less than a minute.
‘It could be an important part of the package, alongside blood pressure and cholesterol checks, in identifying people who could benefit from medication or lifestyle changes.’
The AI tool was trialled in the study on people with diabetes, as they get routine retinal scans on the NHS to check for complications affecting the eyes.
But researchers say analysis of blood vessels in the eye to judge cardiovascular risk should work for most people, and not just those with diabetes.
Professor Bryan Williams, chief scientific and medical officer at the British Heart Foundation, which helped fund the research, said: ‘The more accurately we can detect someone’s risk of a heart attack or stroke, the better the opportunities to prevent these happening.
Researchers used artificial intelligence ( AI ) to analyse digital retinal photographs – images of the back of the eye that are already used to diagnose some conditions
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‘Cutting-edge innovations, like the use of retinal scans alongside health checks, could play a role in improving risk prediction, which is important if we are to reach the British Heart Foundation’s goal to prevent 125,000 heart attacks and strokes in the UK by 2035.
‘However, more research is needed to show this prediction accuracy is robust, and to determine the feasibility of incorporating retinal scans into clinical practice.’
Dr Clare Jonas, research lead at the Stroke Association, said: ‘AI analyses of health data, gathered through screening technology such as this eye scan, have exciting potential for better early detection, especially for those with diabetes who have a greater chance of having a stroke.
‘Advances like these could make it easier for people at risk of stroke to take the right steps to stop it from happening.
‘Whilst there are still many practical questions to answer about whether, when and how AI could be used in clinical practice, we hope the Government’s 10 Year Health Plan will take such technological advances into account to stop more strokes from devastating people’s lives.’
