Invest in skills and infrastructure to counteract inflation say business leaders

Business leaders in Birmingham have called on the government to take control of the economy by investing in skills and infrastructure, rather than the Bank of England’s “balancing act”.

Greater Birmingham Chambers of Commerce (GBCC) said moving away from a reliance on consumer spending was more likely to create a path to prosperity.

Its call came as UK inflation reached a six-year high at 3.1% in November, outstripping wage growth of 2.2% and further squeezing household incomes.

Airfares and computer games were singled out as major reasons for the rise, although food prices also had a bearing, especially for fish, oil and fats, such as butter and chocolate, as did the cost of oil.

The rise will force Bank of England governor Mark Carney to write a letter to Chancellor Philip Hammond to explain why inflation isn’t close to its 2% target.

Paul Faulkner, chief executive of GBCC, said: “Inflation levels crept above the 3% mark for the first time in almost six years as we saw a notable rise in oil prices throughout November – mainly as a by-product of the lower value of the pound.

“Markedly, UK earnings are only rising by around 2% which means households are still feeling the squeeze in the run up to Christmas.

“In his letter to the Chancellor, Mr Carney will no doubt stress that inflation is now close to its peak – however, a key trend we saw in our latest Quarterly Business Report was that local firms are still facing pressures to raise prices which in turn, could produce upward inflationary pressures and continue to have a knock on effect on consumer output.

“Moving away from a reliance on consumer spending and actually investing in skills and infrastructure is more likely to create a path to prosperity than relying on the Bank of England to maintain its balancing act of keeping a lid on inflation whilst also getting households to spend more of their hard earned cash.”