RISING energy prices could push inflation to eight per cent by Christmas, it was predicted on this week’s Go Radio Business Show with Hunter & Haughey.

“I’m very worried,” said Lord Willie Haughey, the Labour peer and founder of Glasgow-based facilities company, City Facilities Management Holdings. “I think that we could be heading to the perfect storm.”

The Bank of England, Britain’s central bank, has a legal duty to keep inflation – rising prices – at the UK government’s current target of 2%. But rising energy prices are predicted to push inflation above 4% by the end of the year. Lord Haughey believes the figure could go a lot higher.

“I think inflation will be near 6% by Christmas, if not 8%,” he said. “And I think it’ll be very, very difficult to keep interest rates where they are at the moment.”

Lord Haughey predicted that interest rates – the cost of borrowing – would also rise significantly from their current historic low of 0.1% as the Bank of England tried to dampen inflation.

“By Christmas, I think people will be talking about 2% for interest rates,” he said.

Entrepreneur Sir Tom Hunter remembered when interest rates were at historic highs – in 1979, Margaret Thatcher’s incoming government raised interest rates to 17% – while interest rates in America passed 18% in the early 1980s.

“I don’t think the economy could stand big interest rate rises, because we’ve all become used to a low interest environment,” Sir Tom added.

On the surging wholesale gas prices pushing smaller energy suppliers out of business, Lord Haughey said: “We’ve seen all these smaller companies that have spawned in the last 10, 15 years. But when you have a grip on a sector, the way the big players have, its very, very difficult to survive.”

He predicted that more energy suppliers would go bust in the next 18 months to two years. “We could end up again with two, three or four larger providers of utilities,” he added.

Sir Tom said that in the long term, nuclear energy had to be part of the energy mix.

“The elephant in the room here is the only long term answer to the world’s energy needs is nuclear,” he said. “That is a fact that no politician will tell you.”

Donald Martin, editor of The Herald and Herald on Sunday, asked what the outlook might be for the labour market.

September 30 marks the end of the UK government’s coronavirus job retention scheme – which initially paid 80% of wages up to £2,500 a month for workers on furlough – temporary leave.

“Willie and I were really worried about unemployment at the beginning of the pandemic,” said entrepreneur Sir Tom Hunter. “But there are so many industries now where they are crying out to take people on – and there aren’t enough people.

“Furlough is going to finish [this] week and I actually think it’s going to be smoother than we first thought at the beginning.”

But the labour market wasn’t perfect and had profoundly changed, he added.

“There are a million vacancies in the UK just now,” he said. “But we haven’t invested enough in training…And employers need to do their bit.”

Lord Haughey felt the pandemic and furlough had skewed the data and predicted a gloomy outlook for the end of the scheme.

“Once the furlough scheme is over...I still believe we will end up with net more people unemployed than before Covid.”

Along with guests from the Scottish business community, The Go Radio Business Show features business advice and insight from Sir Tom and Lord Haughey at 11am on Sundays.