Inflation rises – business industry reaction

Latest data from the Office of National Statistics, that showed the annual rate of CPI inflation increased from 3.9% in November to 4.0% in December 2023.

Commenting on the inflation figures ONS Chief Economist Grant Fitzner said “The rate of inflation ticked up a little in December, with rises in tobacco prices due to recently introduced duty increases.

“These were partially offset by falling food inflation, where prices still rose but at a much lower rate than this time last year. Meanwhile, the prices of goods leaving factories are little changed over the last few months, while the costs of raw materials remain lower than a year ago.”

“For more than two years, inflation has soared above the Bank of England’s 2% target — with the rising cost of living affecting low income households the most. One in three people have missed payments on an essential household bill — two million of which were for the first time. And while the Chancellor hails the recent National Insurance cut as a victory for working households, four million more low-earning adults are being walked into paying income tax as a result of the government’s decision to freeze thresholds.

“There may be a general election taking place this year, but we need to see a long-term plan of action to help those who need it the most. Without support, the number of people in persistent poverty will continue to grow, impacting their health and wellbeing for years to come.”

Martin McTague, National Chair of the Federation of Small Businesses (FSB), said “Seeing inflation inch up marks a disappointing start to 2024. It was a challenging end to last year, and now businesses are bracing themselves for more difficulties that lie ahead.

“The lowering of the consumer energy price cap last October provided a temporary respite for householders. Importantly, business tariffs fall outside this cap, leaving many battling with heightened utility bills.

“Raising the Employment Allowance to tackle the bite of rising labour costs, and increasing the VAT threshold to £100,000 to increase business potential could both be momentous steps forward. Similarly, rolling out tax-free shopping could reel in international visitors.

“Despite today’s rise in inflation, the Bank of England should take care not to leave interest rates too high for too long, as high rates drive up the cost of business debt, adding further to the pressures faced by small businesses.”

Dr. Roger Barker, Director of Policy at the Institute of Directors said “After nine straight months of monthly declines, December’s increase in the headline inflation rate was an unwelcome surprise. The upward blip was primarily caused by sharp increases in alcohol and tobacco prices. This price category is currently rising at an annualised rate of 12.8%, and is being partly driven by the increases in tobacco duty announced in the autumn statement.

“Inflation may give us a slightly bumpy ride during the next couple of months. Next month’s figure will have to incorporate a 5% rise in the Ofgem utility price cap from 1st January, and could also therefore tick upwards.

“However, inflation in the economy is still broadly moving in the right direction. Goods inflation fell from 2.0% to 1.9% in December, although services inflation was unchanged. We still believe that the Bank of England should consider a cut to interest rates sooner rather than later in order to provide a boost to depressed levels of business confidence.”