UK inflation holds firm at 6.7% in September

UK inflation remained at 6.7% in September according to figures released today by the Office for National Statistics (ONS).

The identical annual inflation rates in August and September 2023 were the lowest since February 2022, and down from a peak of 11.1% in October 2022.

An easing of food and drink price rises is thought to have been offset by higher petrol and diesel prices for motorists in September.

In its report, the ONS said food and non-alcoholic drink prices fell by 0.1 per cent from August to September, compared to a rise of 1.1 per cent between the same two months a year ago.

However, the ONS also reported a 0.2 per cent rise in transport costs between August and September, compared to a fall of 1.7 per cent over the two months last year, almost entirely due to rising prices for motor fuel, with the average price of petrol rising by 5.1 pence per litre between August and September 2023.

Mike Randall, CEO of Simply Asset Finance commented, “Reports of steady inflation in September will provide a stable foundation for SMEs who are hoping for a smoother path to fuel their pursuit of growth in the coming year.”

“With a lower inflationary environment on the horizon, small businesses may feel more comfortable seizing growth opportunities which may have otherwise been deemed too high risk. Now is the time to continue embracing alternative avenues in diversifying product lines and investing in technology to streamline processes.”

“However, as specialist lenders, we are not simply fair-weather friends to SMEs. Now more than ever must we continue to underpin SME growth with flexible financing solutions and industry expertise, and support SMEs whatever the weather.”

Neil Rudge, head of enterprise at Shawbrook, agreed: “For business owners this is an encouraging sign, especially as in our recent research inflation and the rising cost of living were cited as the biggest concern (70%) for SMEs over the next twelve months.

“Yesterday’s news that wages rates are simultaneously increasing does mean that labour costs for SMEs are on the up however since inflation is steadying, the increase might be less than what it would be in a higher inflation environment. This could lead to improved profit margins for SMEs as they can adjust their prices more easily, without facing rapidly rising costs.

“With growth on the agenda for many SMEs over the next twelve months, many will feel more confident to start these plans in earnest. Whatever their plans, finance will be a key component and lower inflation and higher wage rates can create a more stable economic environment. This stability could make it easier for SMEs to access financing, as lenders and investors may have more confidence in the business climate. While it’s still a challenging environment and prices are still increasing by 6.7%, a declining inflation environment does reduce the risk of rapidly eroding the value of borrowed funds, making it less expensive for SMEs to finance their operations or expansion.”

However, Jonathan Andrew, CEO at Bibby Financial Services believes that, “Today’s stagnant inflation rate is bad news for UK businesses, especially as our recent research saw 59% of SME owners continue to cite inflation as a key challenge.

“With inflation remaining around three times higher than target, businesses are having to contend with rising fuel costs, skills shortages and persistently high interest rates as they try to stay afloat. If this wasn’t enough, financing is becoming more expensive and harder to access for many smaller businesses at a time when external support is crucial to their survival.

“SME owners and decision makers say they want greater tax incentives, less red tape and access to low interest loans or grants and we must see measures that address these challenges in the Autumn Statement next month. Without further support, we’ll likely see many more small businesses being pushed over the edge over the coming months.”