SCOTTISH Chambers of Commerce has highlighted the “danger” for businesses that they will be forced to pass on higher costs to customers at a difficult time, after official figures showed a further rise in UK consumer price inflation.

Data published yesterday by the Office for National Statistics showed annual UK consumer prices index (CPI) inflation climbed to 1.8 per cent in January – its highest rate since June 2014 - from 1.6 per cent in December.

The EY ITEM Club think-tank highlighted its expectation that annual CPI inflation would climb towards three per cent in the second half of this year, as the impact of sterling’s weakness in the wake of the Brexit vote passed steadily along the supply chain to consumers.

Annual CPI inflation in January was not quite as high as the 1.9 per cent forecast by economists. But it is up sharply from 0.3 per cent in May last year.

The EY ITEM Club observed heavy discounting in clothing stores was the main reason inflation had not come in higher than it did in January.

Petrol prices exerted an upward impact on annual CPI inflation in January.

The ONS noted prices for motor fuels had risen by 3.4 per cent between December and January, in contrast to a 2.6 per cent fall a year earlier.

Food prices also exerted an upward influence on the annual inflation rate. They were flat between December and January, according to the ONS data, having fallen by 0.6 per cent a year earlier.

Liz Cameron, chief executive of Scottish Chambers of Commerce, said: “Businesses are expecting rising

prices throughout this year and we now know that the Bank of England is expecting inflation to be positioned significantly above the Government’s two per cent target for at least the next three years.

“There are a number of factors which are pushing prices up, including rising oil prices and exchange rates in the wake of the EU referendum. The danger for business is that they may be forced to pass on rising costs to customers at a time when real income growth, and consumer spending, is likely to slow.”

She added: “For some businesses, this will add to the pressure of business rates, the apprenticeship levy, new pension responsibilities and the rising cost of the national living wage. That is why we will be looking for a clear sign from the UK Government that it is prepared to tackle the costs to business in next month’s Budget.”

Separate data published yesterday by the ONS showed a 3.5 per cent year-on-year jump in UK factory gate prices in January. This was the sharpest year-on-year rise in factory gate prices since January 2012.

And producers’ input costs, for materials and fuel, were in January up by 20.5 per cent on the same month of 2016 – the fastest year-on-year increase since September 2008.

A survey published by Bank of Scotland on Monday showed factory gate prices north of the Border rose at their fastest pace in 69 months in January.

Howard Archer, chief UK economist at IHS Markit, said: "The marked pace at which consumer price inflation is rising is uncomfortable both for consumers and for the Bank of England. Consumers' purchasing power is now starting to be seriously squeezed."