Official figures published by the Office for National Statistics last week revealed that price increases dropped slightly during September as the economy reopened. However, September’s dip in inflation has been explained to be a temporary data distortion rather than illustrating the reality of the current economic situation. This is due to the lower rate being caused by the fact that dining out costs were significantly less this August compared to last August during the Eat out to Help out Scheme.
The Bank of England has warned that it would have to act over rising inflation, suggesting that the rate may rise soon. The Bank has said that UK inflation is set to exceed 4% which is 2% higher than the government target. With many UK sectors already struggling with increasing costs of raw materials, this news is concerning. Businesses within the manufacturing sector have explained that the rise in cost of metals and machinery is leaving them with no choice but to increase the costs of products to their consumers.
Suren Thiru, Head of Economics at the British Chambers of Commerce said: “A renewed inflationary surge is expected in the coming months with the increase in the energy price cap, partial reversal of the VAT reductions for hospitality and tourism and persistent supply chain disruption. This is likely to push inflation above 4% by the end of 2021.
“While inflation is uncomfortably high, the Bank of England must hold its nerve on interest rates. Raising rates at a time of escalating cost pressures and looming tax rises would severely undermine an already fragile recovery.”
Sara Williams, CEO of Staffordshire Chambers of Commerce, said: “With the intensification of the energy crisis, inflation is likely to increase further which is expected to impact income growth and consumer spending. At a time when we should be trying to encourage businesses to invest in order to support UK economic growth, the rise in inflation will affect firms’ profit margins pushing them into financial strain.
“In the upcoming Autumn Budget, we hope to see the Chancellor reduce cost pressures that businesses are facing in order to avoid further damage to business cashflow.”
The latest price rises in petrol, oil and natural gas have caused more people to show concern about increases in the rate of inflation. The current price for fuel has been recorded at the highest price since September 2013. In addition to this, the energy price crisis has created fear amongst many businesses as this is likely to aggravate the severe supply chain predicament.
We now urge the government to help businesses keep costs down and remain competitive by preventing all policy measures that increase upfront business costs for the remainder of this Parliament.
If you require any business support or advice, get in touch with Staffordshire Chambers of commerce on 01782 202222 or email info@staffordshirechambers.co.uk.
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