Inflation rose to 3% in January.
The UK’s inflation rate, which measures the rate consumer prices rise at over time, was 2.5% in the year to December.
That can only be of concern to businesses with energy price cap raised in January also and prices expected to rise by 5% in April.
It is likely that the Bank of England will be unable to reduce interest rates nearer to its 2% target as it had hoped.
Some City investors say this was wishful thinking. Despite all the warnings, including from the central bank, the economy grew in the final quarter of last year, while pay growth accelerated and unemployment remained low.
When inflation was well above its 2% target, the Bank of England increased interest rates to 5.25%, a 16-year high.
When rates are high businesses also borrow less, making them less likely to create jobs. Some may cut staff and reduce investment.
Corporate insolvencies in the UK have reached a 16-year high, with 1,971 businesses going under in January, marking a 10.7% increase from the previous year.
Pay, after taking into account the pace of price rises, rose 3.4% between October and December compared with the same period a year ago, according to the Office for National Statistics (ONS).
The Office for Budget Responsibility (OBR) is revising its forecasts, indicating a potential increase in the tax burden to 36.4% of GDP this year, the highest since 1950.
Business confidence has plummeted to its lowest level since the pandemic, with the Federation of Small Businesses (FSB) reporting a drop to -64.5 in its confidence metric for the last quarter of 2024.
A government spokesperson said households and businesses would shoulder higher costs due to “Britain’s vulnerability to volatile global gas markets”.
“By failing to invest at scale over many years in the clean, secure, homegrown power our country needs, we have been left exposed to the consequences of events beyond our borders,” they said. “The only way to bring down bills for good is by making Britain a clean energy superpower, which will ensure our energy security, protect consumers, create jobs and tackle the climate crisis.”
So, much as we would have liked to bring you better news, it seems the UK has a long way to go towards recovery yet. As ever our advice is to keep a close eye on business finances and to help you do this you can download our free cash management tool here to help you https://lnkd.in/ee3pfuGa
And if you want to talk over your current business plan or the likely consequences of insolvency we’re happy to help.
Just get in touch.