Firms still facing 'harsh reality' as inflation target met

19-Jun-2024 - Last updated on 19-Jun-2024 at 09:27 GMT

Harsh reality: Sector leaders warn firms still struggling as inflation falls (image: Getty/JLGutierrez)

Voices from across the sector have warned daily struggles for firms continue despite news the Bank of England’s inflation target has been achieved.

Figures released today (Wednesday 19 June) by the Office for National Statistics (ONS) showed the headline rate of inflation had hit the Bank of England’s 2% target for the first time in almost three years.

Driven by a reduction in food and soft drinks costs as well as in the recreation and culture segments, the Consumer Prices Index (CPI) saw a 2% increase in the 12-months the May, down from 2.3% in April.

One of the main upward contributors to inflation was fuel costs.

Meanwhile, Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.5% in the 12 months to May 2024, down from 3.9% in April.

Right direction

British Beer & Pub Association (BBPA) chief executive Emma McClarkin said: “Pubs and brewers will welcome the news that after a sustained and difficult period of high inflation, the target rate of 2% has been achieved.

“But with energy costs and food and drink 25% higher than in 2022, the cost of doing business remains challenging."

The Bank of England is also expected make an announcement on interest rates tomorrow (Thursday 20 June), after consistently holding the figure at 5.25% for some time.

UKHospitality (UKH) chief executive Kate Nicholls said inflation meeting the bank's target was the "strongest signal yet" for rates to be cut.

“It’s clear the economy is heading in the right direction, which should give confidence to the bank that now is the time to begin easing the sustained pressure from high interest rates on businesses and consumers.

“We need to remember costs remain high for hospitality businesses and beginning to reduce the cost burden for the sector needs to be a priority for any incoming Government", she urged.

Different story

On interest rates, McClarkin added while the bank was "unlikely" to lower the number during the election period, rates should "ease during the summer and latter stages of the year".

She continued: “We now look forward to working with the next Government to help put in the place the optimal fiscal and regulatory framework that will ensure the beer and pub sector does not just survive but thrives.”

The annual headline inflation rate in May 2024 was the lowest since July 2021, when it was also 2%, and was last lower in April 2021, when it was 1.5%, according to ONS.

However, Night Time Industries Association (NTIA) CEO Michael Kill commented while hitting the 2% inflation target might "seem like a win", for businesses and consumers on the ground it was a "different story".

Kill said: “This achievement hasn't yet brought real benefits to those who need it most. While some may celebrate, many in our industry are barely hanging on. The harsh reality is that the struggle continues daily, and we must keep supporting those affected to ensure a true economic recovery that reaches every sector of society.'"