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7 months ago

Inflation Latest for SMEs: Filling Up and Filling Your Plate

Inflation has been a hot topic in the UK, with recent data revealing a mixed bag of changes in consumer prices. While food prices experienced their first monthly fall in over two years, fuel prices went in the opposite direction. As the nation grapples with a 6.7% overall rate of inflation, SMEs find themselves will invariably find themselves at the forefront of economic shifts.

Understanding our Current Position

The Office for National Statistics reported that September 2023's inflation rate remained stable at 6.7%, marking an end to three consecutive months of decline. Analysts had anticipated a slight fall, but the steady figure left many wondering what the future looks like.

The current situation highlights the complexity of inflation and how difficult it can be to predict its trajectory. It also serves as a reminder of how volatile inflation can be, as resurgent oil prices related to the crisis in Gaza played a significant role.

Food Prices and SMEs

Over the past few years, high food prices have been a key driver of inflation in the UK. Supply chain disruptions and the conflict in Ukraine have contributed to noticeably expensive food shops for many. However, the recent drop in food prices, including some key indicators like milk, cheese, and eggs, provides some respite for consumers and businesses alike.

Chip shop worker putting chips in a deep fat fryerFor SMEs operating in the food industry directly, these fluctuations can significantly impact their bottom line. They must carefully manage their supply chains, monitor costs and adjust pricing strategies to stay competitive when necessary. Easing food price inflation is a welcome development, but it could be challenging for businesses in this sector.

Fuel Costs and Businesses

On the flip side, fuel prices have been on the rise, with petrol increasing by 5.1p per litre between August and September 2023. This increase has been a significant concern for SMEs relying heavily on petrol and diesel, such as logistics services or tradespeople.

High fuel costs not only affect their operational expenses but also put pressure on pricing, potentially hampering competitiveness. The surge further emphasises the unpredictable nature of inflation, making it a minefield for businesses that try to plan for the future.

Continuing Uncertainty

As the uncertainty persists, the Bank of England has implemented several rate rises in an attempt to get a grasp on inflation. While economists expect rates to remain steady in the near future, the BoE's governor, Andrew Bailey, has acknowledged that further action might become necessary.

Higher interest rates could put additional strain on SMEs, particularly those with variable rate business loans.

SMEs are the backbone of the British economy and play a vital role in job creation and economic growth. High inflation can affect their operations in various ways, from increased operational costs to reduced consumer spending. While some businesses simply pass increases on to consumers, many will need help maintaining profitability.

Economic uncertainty can hinder SMEs' ability to plan for expansion and investment, affecting their financial stability and potential.

The Road Ahead

Businesses need to be proactive in managing and mitigating the impact of inflation by carefully assessing costs, supply chains and pricing. Some may find it beneficial to seek financial advice and explore alternative strategies to protect their financial well-being.

The Government's response could also prove to be vitally important. Measures to support smaller businesses, such as tax relief or incentives for cost control, could help SMEs weather the inflation storm.

While some costs are easing, others are rising, making it a challenging environment for SMEs. Careful financial management and Government support are essential to ensure sustainability and contribute to the long-term health of the economy.

Cut Costs on Energy

Many businesses are looking to cut their energy bills to mitigate the effects of inflation. At BusinessComparison, we can help compare deals from energy providers, allowing you to find the best rates.

Let us Help Your Business

We help you compare essential business products and services, ensuring you get the best deal and helping you with your bottom line. Save time and money with us by comparing today.

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Sam White