SCOTTISH Chambers of Commerce has highlighted pressure on businesses’ profits and household finances, after official figures revealed annual UK inflation stayed stuck at a five-year high last month.

Figures published yesterday by the Office for National Statistics show annual UK consumer prices index inflation stayed at three per cent in October. It came in slightly lower than the 3.1 per cent rate forecast by economists. A rise to more than three per cent would have prompted a letter from Bank of England Governor Mark Carney to Chancellor Philip Hammond explaining why annual CPI inflation was more than one percentage point away from the two per cent target set by the Treasury.

However, annual CPI inflation is up from 0.3 per cent in May last year, ahead of the Brexit vote. Sterling’s post-Brexit vote weakness has made imports more expensive and propelled inflation higher, leading to a renewed fall in real pay.

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Surging food prices exerted major upward pressure on the annual CPI inflation rate last month. Package holiday prices also rose, as did the cost of some recreational goods. Motor fuel prices were a downward force.

Liz Cameron, chief executive of Scottish Chambers, said: “Although the hold in the CPI rate is a more positive outcome than the rise that many analysts were expecting, the continued increase in the prices of food and recreational products emphasises the persistent pressure on the budgets of UK households.”

Citing the Bank of England’s decision this month to raise UK base rates from 0.25 per cent to 0.5 per cent, Ms Cameron added: “Rising mortgage payments, bolstered by the decision to raise interest rates, alongside the sustained weakness of sterling, will also act to slow consumer demand and impact the bottom lines of businesses.”

Tej Parikh, senior economist at the Institute of Directors, highlighted pressures on real pay.

He said: “It appears as though the squeeze on households will persist over the winter and into next year. Subdued consumer activity will also put pressure on revenues, and firms will have to find ways to boost their productivity in order to accommodate higher wages amidst tight labour market conditions and high costs…

“The Bank of England ought to maintain its cautious stance on raising interest rates further.”

Annual inflation on the old all-items retail prices index measure rose from 3.9 per cent in September to four per cent, the highest since December 2011.