UK inflation soars to highest level since 2012 after impact of Eat Out to Help Out scheme

UK inflation has soared to its highest level in almost a decade after a record jump in August, new figures show.

The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation jumped from 2 per cent in July to 3.2 per cent in August as restaurant and cafe prices surged following last summer’s discounts under the Eat Out to Help Out scheme.

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Eat Out to Help Out blamed

The ONS said the increase, which is the largest since records began in 1997, was due to the discounts seen across the hospitality sector last August as part of Chancellor Rishi Sunak’s Eat Out to Help Out scheme.

The discount scheme was rolled out in a bid to boost consumer spending after lockdown, with diners offered up to 50 per cent, or £10 each, off bills at pubs, cafes and restaurants.

Figures showed that last summer’s scheme, as well as the temporary VAT cut, had the biggest impact on August CPI, with restaurant and hotel inflation soaring by a record-breaking 8.6 per cent.

Data also revealed that food and non-alcoholic drink prices surged 1.1 per cent month on month, or 0.3 per cent over the year.

The ONS said the impact should reverse next month, given that the scheme only ran for one month in 2020.

However, while August’s hefty rise is set to be temporary, experts have forecast inflation could reach 4 per cent by the end of this year as the economy recovers from the pandemic.

Jonathan Athow, deputy national statistician at the ONS, explained: “August saw the largest rise in annual inflation month on month since the series was introduced almost a quarter of a century ago.

“However, much of this is likely to be temporary as last year restaurant and cafe prices fell substantially due to the Eat Out to Help Out scheme, while this year prices rose.

“Food and non-alcoholic drink prices rose by more than last year, which also helped push up the rate.”

Supply chain issues

The ONS also said the supply chain crisis is likely to have had an impact on inflation last month, having contributed to pushing up food and non-alcoholic drink prices.

Global supply chain issues, combined with a lorry driver shortage in the UK, has impacted the availability of raw materials and retail stock, leaving supermarket shelves increasingly bare in recent weeks.

Builders have also been reporting delays and higher prices across materials including cement, steel and bricks.

Fuel prices continued to drive inflation higher last month, with the cost of petrol seeing the biggest jump since September 2013.

Average petrol prices stood at 134.6 pence per litre in August 2021, compared with 113.1 pence per litre a year earlier.

The ONS added that the Retail Price Index (RPI), a separate measure of inflation, increased to 4.8 per cent last month, while CPI inflation, including owner-occupiers’ housing costs, was 3 per cent in August, up from 2.1 per cent in July.

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