UK inflation remained at 6.7% in September – business industry reaction

19th October 2023

UK inflation remained at 6.7% in September, figures from the Office for National Statistics (ONS) show, ending a run of three consecutive monthly falls.

Economists had forecast a fall to 6.6% over the year to September.

Grant Fitzner, Chief Economist at the ONS, said: “We continue to see food and non-alcoholic beverages prices fall. We’ve also seen falls in the cost of household appliances and airfares, but they were offset by rising prices for petrol and diesel and the cost of hotel accommodation.”

Commenting Martin McTague, National Chair of the Federation of Small Businesses (FSB) said “This result will cause unease among small firms, who had been hoping that inflation’s recent downward trend would continue. With fuel price rises a major factor in stickier-than-expected inflation, small businesses will be nervous that higher pump prices could undermine their efforts to rebuild their finances in the wake of the cost of doing business crisis.”

“These latest inflation figures will give little comfort to small firms who had hoped to see the base rate begin to fall as soon as possible. We hope the Bank of England will bear in mind that the full impact of its recent interest rate increases has yet to work its way fully through the system, and – with insolvency numbers this year due to hit heights last seen in 2009, following the global financial crisis – the risk of a downward spiral of closures and debt must be avoided at all costs.”

“Small businesses will now be looking to the upcoming Autumn Statement for policies which will support them. Most pressingly, the 75 per cent business rates relief for small hospitality, retail and leisure firms in England must stay in place past its March expiry date, as its loss will be devastating to those hard-hit sectors. A wider overhaul of business rates has long been promised and we are keen for it to materialise.”

“We want to see a ‘kickstart’-style scheme focused on health brought in, to ease labour market shortages and help people fulfil their ambitions. There’s no economic recovery without small firms, and their concerns must be top of mind for policymakers who are serious about getting the economy going again.”

Kitty Ussher, Chief Economist at the Institute of Directors, said “Although prices actually fell in the broad categories of food and transport in September, this wasn’t enough to move the headline annual inflation rate because of the mathematical effect of transport prices having fallen faster this time last year. This wasn’t helped by recent price increases in petrol and diesel, which make up a large component of the transport category.”

“Looking forwards however it is likely that there will be better news next month because we will see the effect of the Ofgem household energy price cap shifting down in October, which makes up a large proportion of the index used to calculate CPI inflation.”

Arun Singh, Global Chief Economist at Dun and Bradstreet said “The stability in consumer prices from August to September, along with a minor decrease in the core measure of inflation – which provides a more accurate gauge of underlying price trends – is putting pressure on the Bank of England to sustain high interest rates.”

“The bigger picture though is that consumer prices are trending lower as we’ve seen a fall in inflation over the past six months and we’re likely to see softer prices over the next few months as tighter monetary policy continues to work through the economy.”

“However, companies should continue to arm themselves with the knowledge and tools necessary to make smarter decisions. This is where quality data and the insights it provides businesses is essential, providing them with a competitive advantage and helping strengthen business resilience.”

David Bharier, Head of Research at the British Chambers of Commerce said “Today’s figure, showing the CPI is stuck at 6.7%, shows that inflation for consumers remains stubborn. However, prices in the production sector continue to fall as the PPI rate stands at –2.6%. Our Quarterly Economic Survey has been showing a diminishing percentage of firms expecting their prices to rise for five quarters running, albeit this indicator remains at a high level.”

“But this is just part of the picture, as our research finds that most SMEs report no increases in sales, exports, or investment. The rise in interest rates has also emerged as a prime concern for almost half of businesses, with increased borrowing costs another barrier to contend with. Businesses need clarity on interest rates, as well as a longer-term plan for growth in the economy, focusing on infrastructure, skills, and alleviating trade barriers.”