Business and trade leaders are calling for a halt in base rate hikes as inflation slows to 6.7%, and for Government to announce small business support measures in the Autumn Statement
Responding to the news that CPI stood at 6.7% in the year to August 2023, down from 6.8% in July, Martin McTague, National Chair of the Federation of Small Businesses (FSB) said:
“It’s fair to say small firms will be relieved there wasn’t a rise in inflation, as some had predicted, but this result is far from the substantial fall they were hoping for.
“The core inflation drop is good news, although the fact that fuel contributed the most on the upward side to inflation is a concern. If pump prices rise further, this will have knock-on effects to almost all sectors.
“With signs that interest rate rises are starting to bite, tomorrow’s base rate decision by the Bank of England has to be the peak for rates, one way or another. Leaving rates high for longer than needed will devastate the chances of an economic recovery.
“Small firms are living with the effects of inflation that has been far higher than the target for many months now, so today’s inflation results aren’t enough alone to remove their worries about the economic situation, especially given the fall in GDP announced last week.
“Around one in ten small businesses say they are at least at moderate risk of insolvency, twice the rate of large companies, and risks abound, from higher debt repayments to lower levels of consumer spending.
“The Government should commit to measures to help small firms in the Autumn Statement – they are the ones who will put economic growth back on an upward path, if given the right conditions.
“Decisive action to end late payments once and for all is a necessary step. Allowing large corporates to force their small suppliers to offer them free credit is scandalous and must become unacceptable in the eyes of regulators and the law.
“We also want to see an overhaul of business rates, and an extension of the current discount for retail, hospitality and leisure businesses beyond next April. Raising the VAT threshold to £100,000 would be another way to unleash the potential of many small businesses, helping to stimulate the economy.”
UKHospitality Chief Executive Kate Nicholls said: “Inflation slowing at a glacial rate will leave hospitality businesses incredibly concerned ahead of next month’s crucial figures, which determine the annual rise in business rates.
“In the current economic climate, rates rising with inflation, coupled with reliefs ending, would be catastrophic for businesses. It is unthinkable for the Government to press ahead with its current plans, which will mean an almost billion-pound bill for the sector. A commitment from the Government to freeze the business rates multiplier and commit to an extension of business rates relief is needed as soon as possible.
“In the short-term, implementing Ofgem’s recommendations for action in the business energy market would see energy bills fall and help rapidly cut inflation.”
Ed Bignold, Managing Director with Alvarez & Marsal’s Corporate Transformation Services, said:
“This morning’s data showing a decrease in overall inflation as well as in the UK hotel and restaurant industry falling from 9.6% in July to 8.3% in August, will be welcome news to owners and consumers alike, but businesses still face wider economic headwinds.
With high season summer trading coming to a close for most markets and businesses, and in the context of a still relatively subdued conference and event market – which otherwise would supplement demand during the autumn period – the challenge of high operational expenses may still be felt more severely in the coming months than in any other period for several years. This will be a new and more acute test of the continued viability of many hotels and restaurants in the sector.”
Michael Kill, CEO of the Night Time Industries Association (NTIA) said, “As CEO of the Night Time Industries Association, I am deeply concerned about the ongoing challenges our businesses face. The drop in inflation today is not telling the true story on the ground, with consumer and business challenges being exacerbated by the Government grinding out a long-term strategy whilst ignoring the critical issues happening within key sectors today.”
While the overall inflation rate has shown a decline, businesses within the night hospitality and time economy sectors continue to face mounting pressures. Rising operational costs, coupled with reduced consumer spending, have created an even tougher environment for this vital sector within the UK economy. The impact of multiple crises and the associated restrictions has left many nightclubs, casinos, bars, and entertainment venues struggling to recover.
Mr. Kill further emphasised, “Our businesses are grappling with ongoing business critical challenges, from staffing shortages to supply chain disruptions. The hospitality and night time economy is a critical component of our cultural and economic landscape, and we urge the government to consider targeted support measures in the November budget, to ensure the survival and recovery of these businesses.”
The Night Time Industries Association is calling for a comprehensive review of the support available to businesses within the hospitality and night time sectors, starting with an extension of the current business rates relief, but also for the government to acknowledge the unique challenges they face.