Increased food costs were the biggest driver, with annual inflation for these items now running at 12.7%, up from 9.8% in June – fuelled by price rises for basics such as bread, milk, cheese and eggs.

The food and non-alcoholic beverages, and transport divisions made the largest upward contributions to the monthly rates in July 2022.

Kien Tan, director of retail strategy at PwC, said: ‘Supermarkets have had little choice but to pass on price increases from suppliers, themselves contending with unprecedented inflation in raw material and ingredient output costs.

‘This has been particularly acute in labour and utility intensive categories like dairy, with reports of the price of a pint of milk having more than doubled in some stores since the start of the year.’

The current inflation rises in the economy is largely due to the war in Ukraine, which has increased the prices for a range of commodities, particularly fuel and energy prices, as well as ongoing supply chain disruptions.

Concerns for businesses grew from both supply and demand pressures, with deepening impacts on household budgets, meaning that some businesses are reporting a downturn in consumer spending.

Annual inflation rates for CPI including occupiers’ housing costs (CPIH) rose by 13.6% in the 12 months to July 2022, up from 12.7% in June. The rate has risen sharply since February 2021 and is the highest level recorded.

Adam Zoucha, managing director of FloQast, said: ‘Inflation is really putting the heat on the accountancy function. With high inflation, the pressure on businesses’ purse strings will intensify and bring more scrutiny and demand for quick and accurate financials at month end.

‘High inflation will also act as a lever for change. It will prompt many businesses into action, as they search for ways to give their accountants more time to think strategically.

The squeeze on small business and household budgets will undermine chances of economic recovery, according to the Federation of Small Businesses (FSB).

Martin McTague, national chair for FSB, said: ‘We’re seeing a toxic cocktail of rampant inflation, high taxes, soaring energy costs and shrinking economic growth. Action is needed right now.

‘While the consumer prices rate of inflation bursting through 10% is eye-watering, producer input prices are up by more than double that figure and this will filter through, pushing up the cost of living even more.

‘The cost-of-living crisis can’t be solved without addressing the cost of doing business crisis.’

The FSB called for a reversal of the hike in national insurance, a cut in VAT and fuel duty, and extra help with energy bills for struggling small firms.

FSB research found that more small firms reported a decline in revenues in Q2 than an increase (40.7% against 34.8%).

McTague added: ‘With so many small business on the brink as inflation runs ahead of their ability to keep up, the time is now for the government to act to prevent the loss of even more businesses.’