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16 Aug 2023

Falling inflation is encouraging for businesses but reassurance needed that interest rates have peaked, says Chamber

Commenting on the latest figures from the Office for National Statistics (ONS) showing consumer prices index (CPI) inflation was 6.8% in the year to July 2023, East Midlands Chamber chief executive Scott Knowles said: “Inflation falling sharply for the second consecutive month is encouraging news for businesses, given sticky inflation has been one of their biggest concerns for some time now.

“This trajectory reflects what East Midlands firms are telling us, with our Quarterly Economic Survey showing the proportion of companies that expect to increase their own prices falling from 54% in the first three months of the year to 36% in the second quarter.

“Yet while costs for energy, fuel, people and raw materials have eased slightly in recent months, they remain at relatively high levels and continue to squeeze margins.

“This ultimately restricts businesses’ ability to invest in their plant, machinery and people, which is integral to driving forward productivity in order to bring down costs and, thus, inflation.

“Another major barrier to investment across all sectors is high interest rates, which affect the cost of borrowing and is a blunt instrument in tackling the economic issues that have led to sky-high inflation.

“Businesses need reassurance that not only have interest rates have reached their peak, but Government has a plan to develop an economic policy that will support them to invest.

“To this end, we have urged policymakers to focus on what we call the ‘four Is’ – investment, innovation, infrastructure and international trade – in our regional economic blueprint, titled A Centre of Trading Excellence: A Business Manifesto for Growth in the East Midlands and Beyond.

“Action in these areas should involve helping with the tight labour market by incentivising firms to upskill their people and making it easier to recruit skilled workers from overseas, more financial support for research and development in key sectors, and cutting red tape that continues to hinder exports.”