Credit, Collections & Insolvency News
Falling petrol prices have pushed the inflation rate back to 9.9% in August latest Office for National Statistics (ONS) have shown.
The consumer prices index has dipped from 10.1% in July to 9.9% last month, with cheaper motoring costs offsetting the impact of expensive food prices, although prices are still continuing to rise at nearly their fastest rate in 40 years.
Commenting on the data, Jack Leslie, Senior Economist at the Resolution Foundation, said:
“High inflation continues to drive Britain’s cost-of-living crisis, but the outlook has brightened considerably over the past week.
“The Energy Price Guarantee should prevent a second winter surge in prices, while factory gate inflation is starting to ease.
“However, high inflation is set to be with us for some time, particularly for low-income households who continue to be hit hardest by high prices. Having delivered £2,200 worth of cost-of-living support for every household this year, the government will need to consider what support will be needed next year too.”
Kitty Ussher, Chief Economist at the Institute of Directors, said “This is the first time that the inflation rate has fallen since September last year, and will be reassuring to businesses for whom ever-rising headline rates are a driving factor behind an overall lack of confidence in the UK economy.”
“However the fact that the falling headline rate is due to changes in the price of petrol and diesel, which is driven predominantly by the international price of oil rather than by domestic factors, means today’s news is unlikely to alter expectations of a rise in interest rates when the Bank of England meets next week.”
“In fact, the inflation rate for locally-produced products and services such as dairy and personal care items continued to rise in August; it is home-grown inflationary pressures such as these that are the main concern of the Bank of England.”
Director of Policy and Public Affairs, Alex Veitch, said “This rise in Consumer Prices Index inflation confirms the sustained pressure businesses and consumers have been facing over the past year.”
“This is also reflected in the squeeze on businesses’ operating costs as Producer Price Inflation figures remain at record highs of 20.5% in the year to August 2022.”
“While the rate of growth has eased slightly, this has been driven by a fall in motor fuel costs – other goods continue to rise. There is a limit to how long any firm can sustain these rising costs before something has to give. We know from our research that two thirds of businesses plan to increase their own prices.”
“The size of last week’s Government intervention on energy prices should have a dampening effect on inflation when it is enacted.”
“But the lack of detail on exactly how much help any individual business will get, and for how long, means very few will be planning to invest any time soon.”
“There are also a whole host of other issues ranging from transport and shipping costs, raw material prices, energy sector regulation and the tight labour market that must be addressed.”
“It is imperative the Government’s forthcoming ‘fiscal intervention’ provides business with confidence that there is a cohesive plan to take the economy forward.”
Simon Webb, Managing Sirector at LiveMore, said “Rather unexpectedly, CPI inflation fell by 0.2% in August, down to 9.9%. Now that the energy price cap has been reduced by the new government to £2,500 from October, inflation is expected to be dampened to some extent. However, this is almost twice as high as this time last year when the energy price cap was set at £1,277, so many people are still experiencing significant increases in their cost of living.”
“It is inevitable that the Bank of England will raise base rate next week, the question is by how much? The industry guess work is anywhere between 0.5% and 0.75%. Whatever the increase, let’s hope it’s sufficient to help contain inflation and avoid tipping the base rate environment into territory not seen for 14 years.”
Douglas Grant, Group CEO at Manx Financial Group PLC, said “Today’s inflation announcement yet again signals just how difficult the remaining part of this year is going to be. We believe that demand for working capital, which has already reached unprecedented levels, will soar even further as more businesses desperately require liquidity provisions to counteract rising interest rates, supply chain issues, increases in wages and additional pandemic-induced headwinds. Our research recently revealed that 22% of UK SMEs that needed external finance and/or capital over the last couple of years, were unable to access it. Indeed, more than a quarter have had to stop or pause an area of their business because of a lack of finance. SMEs continue to struggle with accessing finance and, worryingly, this lack of availability is costing them and the UK economy in terms of growth at a time when it is needed the most. The amount of growth that is being sacrificed is significant and will require new solutions which are designed to address this funding gap.”
“Last month’s announcement of the extension of Recovery Loan Scheme was very good news for UK businesses but more needs to be done. For some time, we have been calling for a sector focused permanent government-backed loan scheme which brings together both traditional and alternative lenders to guarantee the future of our SMEs. As the government looks for ways to power the economy’s resurgence, the importance of a permanent scheme cannot be understated, it could act as the fundamental difference between make or break for many companies and, in turn, our economy. We very much hope this is something that becomes a reality.”
Helen Morrissey, Senior Pensions and Retirement Analyst at Hargreaves Lansdown said “Inflation eased this month, but it still remains sky high and looks set to stay so for the foreseeable future. This means pensioners are in line for a significant pension boost next year as long as the government keeps its pledge to keep the triple lock. Yesterday’s wage data put average wage growth at 5.5% so pensioners are already in line for a record-breaking increase, albeit one that is well below inflation. If the link to CPI remains, then we could see pensioners on a full new state pension get more than £200 per week.”
“Last year’s 3.1% increase was no match for soaring inflation and has left many pensioners struggling and so a more generous increase will be welcomed. However, any such increase will not kick in until April which feels a very long way away right now for those struggling to make ends meet.”