Inflation fall not enough to calm fears on interest rates, say small firms

Responding to the information that CPI stood at 6.8% within the yr to July 2023, down from 7.9% in June, Martin McTague, Nationwide Chair of the Federation of Small Companies mentioned: “Whereas a drop in inflation supplies some consolation, right this moment’s figures present much less of a drop in inflation than hoped for, and can renew fears of a wage-price spiral, and of but extra base fee hikes in future.

“The fear now’s that rising wages ignite a contemporary wave of inflation in September, which is able to threaten the momentum from June’s GDP progress. The price of doing enterprise disaster nonetheless has a grip on the small enterprise neighborhood, as costs for a lot of key inputs, from vitality to parts and uncooked supplies, stay far above the place they had been a yr in the past.

“Any discount in inflation is nice information, however the enormous toll that spiralling costs have inflicted remains to be being keenly felt by small companies.

“Regardless of the inflationary pressures that we’ve seen for greater than a yr, extra small companies have seen their revenues shrink over every of the final 5 quarters than have seen them enhance, in line with our analysis.

“Small enterprise confidence ranges fell again within the second quarter, with stickier-than-expected inflation alongside rate of interest will increase enjoying a significant half in that. We very a lot hope that these inflation figures proceed on a downward development in Q3, to provide confidence amongst small companies an opportunity to get well.

“Yesterday’s file wage enhance figures will nonetheless make the trail again to decrease inflation and decrease rates of interest extra difficult, whereas the information that GDP rose by 0.5% in June makes the job of sustaining restoration whereas bearing down on inflation a difficult one.

“With low rate of interest offers on loans and finance choices near-impossible to search out, small companies trying to develop might be protecting their fingers crossed that the tip of base fee rises is in sight.

“We’re calling on the Authorities to make use of the remainder of the summer time to plan a progress agenda for small companies, and tackling late cost needs to be high of the record. Having to chase overdue funds is a large drain on small companies’ assets, growing their price of doing enterprise and making them extra more likely to have to use for finance to handle their cashflow.”

Associated