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High inflation 'cost the UK £10bn' over last three years

The UK economy has lost £10 billion over the last three years thanks to high inflation, a new report from the Ernst & Young Item Club has revealed .

According to the group high inflation will be a "permanent fixture" for the UK and it will have a "corrosive impact" with the rate averaging 3.5 per cent rather than the government's set target of two per cent.

The report does not expect inflation to drop below 2.5 per cent before 2017.

One of the main reasons for the rise has been the fact that consumers have been struggling to cope with food prices that have risen 40 per cent since 2007, while the cost of fuel and education has also soared.

The group expects the consumer prices index will rise to three per cent over the summer, but say it will fall back to 2.5 per cent by the autumn when energy bills and food prices stabilise again.

By Claire Archer