Small firms welcome drop in inflation as energy prices plateau, but food inflation still takes a bite out of margins

Responding to the news that the consumer prices index rose by 8.7% in the year to April 2023, down from 10.1% in March, Tina McKenzie, Policy Chair, Federation of Small Businesses (FSB) said: “The fall in inflation is helpful, but now small firms will be hoping for further steep drops in coming months.

“For many small firms, the pressure on margins from all directions has felt unrelenting, so today’s figures bring a bit of much-needed relief. We are still a long way off the Bank of England’s 2% target, however.

“Energy prices have stabilised, contributing to the fall in the overall rate. There are, however, tens of thousands of small firms trapped on much higher tariffs fixed in summer last year, and we are calling on energy companies to allow any small business in this position to be allowed to ‘blend and extend’ their contract, to benefit from lower wholesale prices.

“The food inflation rate has barely budged, which is bad news for hospitality and food retail businesses, and may hamper future improvements in consumer confidence as households have less left in their budgets once essential costs have been accounted for.

“Our Small Business Index indicates that the general improvement seen in Q1 in overall confidence levels isn’t equally distributed across sectors, with retail, hospitality, and manufacturing firms lower than the average for all sectors.

“Small firms’ resilience and canniness are more vital than ever in the face of inflation’s unexpected persistence, and small firms will be looking to other signs of economic recovery to provide hope, from a marked uplift in consumer confidence in recent months to a significant decrease in the odds that a recession is on the cards.

“Ongoing inflation makes the argument for prompt payment even more crucial, as the value of delayed invoices erodes for every day they are left unpaid. Large corporates must take responsibility for their treatment of their suppliers, and commit to speedy and transparent payment practices.”