The UK's overall inflation has fallen below double digits for the first time since August, but businesses have warned they are still facing ongoing inflationary environments.
The consumer prices index rose by 8.7% in the year to April 2023, down from 10.1% in March, according to the Office for National Statistics.
This is the first time UK inflation has fallen below 10% since August of last year, as soaring energy prices, Russia’s war in Ukraine and rising commodity costs have battered UK supply chains.
The Federation of Small Businesses policy chair, Tina McKenzie, said while small firms welcomed the news, energy costs are still stifling businesses.
She said: “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.”
Overall inflation peaked in October at 11.1%. And while food inflation has fallen marginally, it is still at its second highest level since August 1977.
Food and non-alcoholic drink annual inflation slowed in April to 19.1%, down from 19.2% in March. Of the 49 main food categories reported in the official statistics, 44 recorded double-digit inflation, with olive oil seeing the highest rise in prices on the year at 46.4%.
Meanwhile, eggs – which have been in short supply across the UK – saw year-on-year inflation of 37%, while low fat milk rose by 33.5%.
McKenzie said: “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.”
The Food and Drink Federation (FDF) chief executive, Karen Betts, added: "It’s disappointing to see food and drink price inflation remaining at such high levels, but today’s figures underscore the huge pressure the whole food and drink supply chain continues to be under, with input costs across the board – even where these have started to fall – still much greater than they were pre-pandemic.”
She outlined that representatives from the food sector met with chancellor Jeremy Hunt earlier this week to discuss how industry and government can work together better to tackle inflation.
Betts said: “Companies are cutting costs wherever possible and are turning to price rises only as a last resort, but the scale of cost increases has meant that price rises have been unavoidable in many cases.”
The FDF has called on the government to “take the heat out of inflation in our sector” by addressing “persistent” labour and skills shortages, and by ensuring new labelling requirements flowing from the Windsor Framework – the new EU-UK agreement on the Northern Ireland Protocol – are kept to a minimum.
British Retail Consortium chief executive Helen Dickinson said the government needs to avoid “creating unnecessary new regulatory burdens that might put this at risk”.
She said: “From new packaging costs and a deposit return scheme, to new Windsor framework labelling and food advertising regulations, the government would do well to minimise the cost-impact of new policy initiatives.”