Prices of goods and services have risen by 9.9% in the UK since last August. That's the worst rate in the G7, but countries with closer ties to Russia are experiencing rates twice as high. Sky News looks at the reasons why, including the move away from cash.
UK price rises slowed in August compared to July, but are still at the highest rates in more than 40 years. However, they are slow in comparison to some other parts of Europe.
The other highest price rises across Europe are also all former-Soviet satellite states in the east. Prices in the Czech Republic, Hungary and Poland have risen by more than 10%.In the years before COVID it was difficult to see a clear inflation pattern dividing former Eastern Bloc countries. Douglas McWilliams, Deputy Chairman of the Centre for Economics and Business Research , says that this change is linked to the Russia-Ukraine war and related sanctions, but also due to the economic make-up of these countries.
"It's the same as with lower income groups within this country where food and energy form a higher proportion of their total spending so they are most affected by price rises of these things." Mr McWilliams said that Switzerland has been able to keep price rises low because agricultural protections meant their food was already more expensive than other countries. They are less impacted by international price rises as a result.
"If there is a gap it will add to borrowing the same way furlough did and we will have to pay that debt off in the long term. I would assume the Bank of England will continue to raise interest rates and I would expect us to see some kind of recession over the next 12 months."Mr McWilliams said there are three key factors:"It [the pound] has weakened slightly versus the euro and quite a lot against the dollar, and that means international prices of all kinds have been rising.
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