Deflation looms

Energy price cuts and a supermarket war have pushed Britain to the brink of deflation. Economists have already said that it was a close call as to whether inflation remained at zero in March or dipped to -0.1%. Alan Clarke, an economist at Scotiabank, said subdued price increases by high street stores had weighed down on price growth, while a 5% price cut by British Gas in March would also help tip Britain into deflation. The Bank of England has said that it is likely that Britain will enter a period of mild deflation in the first half of this year, driven by a collapse in the oil price. The Office for Budget Responsibility, the Government's independent forecaster, predicted last month that inflation will not rise to 2% until 2019.