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21st June 2023

Chambers react to latest inflation figures

The ONS has released the inflation figures for May. Inflation remains at 8.7%, the same as the previous month.

Reacting to the latest ONS inflation figures, Paul Butterworth, CEO, at Chambers Wales South East, South West and Mid, said:

“Today’s published CPI rate of inflation remains at 8.7% and whilst being brought under 10%, this sustained high inflation continues to hurt the Welsh economy and Welsh businesses.

“As the cost of living rises, associated expenses in raw materials, production and distribution costs also escalate, directly affecting the profitability of businesses that are already operating on narrow profit margins which in turn decreases consumer confidence, business confidence and ultimately investment. Uncertainty about future prices and the stability of the economy makes businesses hesitant to make long-term decisions.

“This reluctance to invest can hinder business expansion, innovation, skills and job creation, impacting the overall economic growth of Wales. Welsh businesses will be keeping an eye on interest rates, currently sitting at 4.5% and expected to rise. While this may not be a terminal problem for many Welsh businesses, reduced inflation rates and interest rates are essential for allowing Welsh businesses to thrive long-term.”

David Bharier, Head of Research at the BCC, said:

Today’s CPI rate of 8.7% shows that inflation is remaining elevated for longer than expected. After 18 months of price shocks, the impact of sustained inflation remains the top issue for the vast majority of firms we speak to. What started as a commodity price shock has now created a wage-price spiral.

However, much more positively, the producer input price (PPI) rate has slowed significantly once again to 0.5%With our research showing that gradually fewer firms expect their own prices to rise, energy and commodity costs may fall away as drivers of consumer inflation.

“With the interest rate currently at 4.5% and expected to rise further to tackle inflation, widespread skills shortages, and trade frictions on the rise, the cost of doing business is the highest in years. Action by the Government to help with the squeeze on the labour supply, reform of business rates and support on exports would go some way to helping them face the future with more confidence.”

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