Inflation accelerates to 3.1% – industry reaction

UK inflation accelerates to 3.1% per cent in July, up from 2.6 per cent in June, according to the latest data from the Office for National Statistics (ONS)

Motor fuel was the biggest driver of the latest rise, with the energy shock feeding through to household costs. This figure sits above the Bank’s 2% target and is just 0.2% lower than the highest figure year-to-date, which was 3.3% in March.

Commenting on the inflation figures for August, ONS Chief Economist Grant Fitzner said “Sharp price rises for petrol and diesel pushed inflation up again in August. Higher airfares, particularly for long-haul journeys, also contributed to the increase.

“Rising crude oil and petrol prices increased both the annual cost of raw materials and the price of goods leaving factories respectively.”

James Burgess, Head of Commercial and insolvency expert at Atradius UK, said “Our insurance claims data suggests that persistent inflation and wider cost pressures are creating increasing financial strain for businesses in certain sectors.

“Claims made by suppliers against businesses for missed or delayed payments fell 12% month-on-month in July. However, our data shows the differing impact across sectors with claims in the agricultural sector rising by 33%, while retailers are seeing a 40% monthly increase and claims are up 24% year-on-year.

“These shifts in payment behaviour can be an early indication that firms in these sectors are finding it harder to absorb rising costs and maintain healthy cash flow.

“With energy, fuel and global commodity markets remaining volatile, suppliers in these sectors should keep a close watch on customer payment behaviour and act early to protect liquidity and manage credit risk.”

Mike Randall, CEO of Simply Asset Finance said “As the days get shorter and autumn approaches, a fresh uptick in inflation risks casting a longer shadow over SME confidence. While businesses remain optimistic, we need to avoid rising costs, softer demand and continued uncertainty chipping away at ambition and putting the brakes on growth.

“Tackling this will need decisive action from the new Government. This means proving that it can deliver tangible support that helps businesses invest with confidence, rather than more promises that fail to shift conditions on the ground.”

Neil Rudge, Chief Banking Officer at Shawbrook, said “When inflation ticks up, the conversation rightly turns to households. But there is another group that barely gets a mention. Medium-sized businesses are the shock absorbers of the UK economy, absorbing higher input costs while trying to limit the impact on their customers and employees. That often means tighter margins, delayed investment and harder choices.

“If inflationary pressure persists, it is this critical middle that will quietly carry much of the load. Their contribution, and the trade-offs they are making, deserve far more attention than they currently receive.”

Vikki Brownridge, Chief Executive Officer, at StepChange Debt Charity aid “Inflation now stands at almost the highest rate this year, and as it hovers above 3%, we are worried about households already struggling with their finances. We’ve seen significantly more people than expected in need of free debt advice this year, with our most recent client volumes revealing a 13% rise year on year.

“Prices are rising again at a time after long-term stagnation in wages and real-terms cuts to benefits, all of which will put further pressure on people who are already having to make difficult choices about what they can or rather can’t afford. Essentials such as food and energy take up a significant proportion of many household budgets, and with these costs set to rise further this autumn and winter, we worry about the realities households will face and the implications for our service levels.”