Shropshire business chiefs share concerns on 'stubbornly high' inflation

The pressure on households from the rising cost of living did not ease last month, new figures revealed, as inflation remained higher than expected.

Consumer Prices Index inflation stayed at 8.7 per cent in May, the same level as in April, despite experts forecasting a fall to 8.4 per cent.

It showed people continue to face higher costs and will put more pressure on the Bank of England to raise interest rates even further.

Core inflation, excluding food, energy, alcohol and tobacco, meanwhile, is at its highest level in 31 years, the Office for National Statistics’ chief economist Grant Fitzner said.

Reflecting on the impact on business, Ruth Ross, Shropshire Chamber of Commerce’s chief executive, said: “Concerns over recruitment and skills have consistently been top of the agenda for Shropshire businesses in recent months, but after 18 months of price shocks, the impact of sustained inflation is of growing concern.

“The fact that analysts were expecting to a see a fall in inflation this week, which has not materialised, piles even more pressure than ever on the Bank of England to continue raising interest rates.

“The cost of doing business is at its highest in many years, and is undoubtedly damaging confidence. On a slightly more positive note, however, the British Chambers of Commerce points out that the producer input price rate has slowed significantly once again to 0.5 per cent.

“Research shows that fewer firms expect their own prices to rise, so the hope is that energy and commodity costs may fall away as drivers of consumer inflation.”

The British Chambers of Commerce said action by the Government to help with the squeeze on the labour supply, reform of business rates and support on exports would go some way to helping them face the future with more confidence.

Mike Goodall, from the Federation of Small Businesses in Shropshire, said a rise in core inflation was 'unwelcome news for all of us'.

"It means that higher lending interest rates are likely to remain with us for the foreseeable future, as will the relentless squeeze on spending and confidence," he said.

"For small businesses in Shropshire, who are already citing the general economic conditions in the UK as their top challenge, persistently high inflation and rising interest rates act as brakes on their growth and prosperity.

"The Federation of Small Businesses is urging the Bank of England to show moderation and to avoid further interest rate hikes, not least because they have proved spectacularly ineffective in tackling inflation to date."

Paul Butterworth, CEO, at Chambers Wales South East, South West and Mid, added: "This sustained high inflation continues to hurt the Welsh economy and Welsh businesses.

“As the cost of living rises, associated expenses in raw materials, production and distribution costs also escalate, directly affecting the profitability of businesses that are already operating on narrow profit margins which in turn decreases consumer confidence, business confidence and ultimately investment.

"Uncertainty about future prices and the stability of the economy makes businesses hesitant to make long-term decisions.

“This reluctance to invest can hinder business expansion, innovation, skills and job creation, impacting the overall economic growth of Wales.

"Welsh businesses will be keeping an eye on interest rates, currently sitting at 4.5 per cent and expected to rise. While this may not be a terminal problem for many Welsh businesses, reduced inflation rates and interest rates are essential for allowing Welsh businesses to thrive long-term.”