Rate fall stalls, so what comes next?

Food shopping trolley

Research paints a deeper picture of prospects for business

The UK inflation rate remained at 6.7% throughout September, unchanged from August, according to the latest ONS figures. Food prices fell – for the first time since 2021 – but were countered by high fuel costs.

This not only defied many predictions but represented a pause in the downward trend and casts doubt on Rishi Sunak’s ability to achieve his commitment to halve it by year-end.

But there were signs of optimism amid understandable circumspection in the commercial sector, backed in most cases by a series of research efforts made by London firms on various aspects.

Neil Rudge, head of enterprise at Shawbrook said that business owners could see this as an encouraging sign, especially as their recent research had demonstrated that inflation and the rising cost of living were cited as the biggest concern for small businesses over the next 12 months.

Lagarias: inflation comes in waves

“Earlier news that wage 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 it would be in a higher inflation environment. This could lead to improved profit margins as they can adjust their prices more easily, without facing rapidly rising costs.

“With growth on the agenda for many over the next 12 months, many will feel more confident to start these plans in earnest.”

Jonathan Andrew, CEO at Bibby Financial Services said the announcement was bad news for businesses, especially as their recent research saw 59% of SME owners continue to cite inflation as a key challenge.

He added: “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.”

“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.”

Grant: bumps in the road

Douglas Grant, Group CEO of Manx Financial Group felt that this signals that the road ahead is “far from being without bumps”.

He said: “It is more important than ever that SMEs take this as a reminder to review their existing lending structures and ensure they are prepared for further challenges. Recent research conducted by Manx reveals a significant shift in the financial landscape.

George Lagarias, Chief Economist at Mazars summed it up when he said: “Inflation comes in waves. The picture from the data is unfortunately a simple one. As food and goods prices begin to fall, energy prices are rising again. This is a sign that the second wave of inflation is subsiding, but the third wave is ahead of us.

“The swiftly rising tensions in the Middle East are exacerbating the situation. Would a de-escalation of hostilities help? Absolutely. A quick end to oil price speculation could, all other things being equal, stop the third inflation wave at the onset and allow prices to normalise.”


What the latest inflation figures mean for business