The UK inflation rate for December dropped slightly but remained in double digits, leaving businesses and consumers continuing to face a cost of living crisis.
Office for National Statistics (ONS) figures put the rate of price rises at 10.5% in the year up to the end of December 2022, compared with 10.7% in the 12 months leading to November.
The fall was largely attributed to falling petrol and diesel costs but food prices had their highest increase since 1977, reports the BBC.
Grant Fitzner, chief economist at the ONS, said: “It is important to point out although we’ve seen a second consecutive easing, it is fairly modest fall and inflation is still at a very high level with overall prices rising strongly.”
‘Long way to go’
Although analysts believe inflation peaked at 11.1% in October, it is still way above the Bank of England’s 2% target.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said there was a “long way to go before the price spiral is under control”.
Support needed
Alpesh Paleja, the CBI’s lead economist, said inflation should fall further towards single digits throughout the year but warned that firms would still require government support.
“Despite this, the cost-of-living crisis will continue to be a very real problem for both households and businesses, as price pressures remain high in the short-term,” he said. “Against the backdrop of a recession firms will continue to face higher costs and weak demand conditions.”
The BoE is due to meet for its next rate-setting meeting in February. Interest rates are currently 3.5% after nine rate rises since December 2021.
By contrast, US inflation fell to a 15-month low of 6.5% in December while eurozone price rises dropped back to 9.2%, as lower oil and gas costs and improving global supply chains eased pressures.
Interest rate rise
With no sign of easing in food prices, which rose by 16.9% in the 12 months to December 2022, the BoE is widely expected to increase its key lending rate to 4% next month, reports the Evening Standard.
Chancellor Jeremy Hunt welcomed the fall in inflation, which he said was “a nightmare for family budgets, destroys business investment and leads to strike action”.
The OBR has forecast the rate of inflation will fall to less than 7% by this summer and 4% by the end of the year, before turning negative in the middle of 2024.
Managing costs in trade
On top of rising prices, businesses have also had to adapt to new customs rules for continued trade with the EU following Brexit.
The Institute of Export & International Trade’s (IOE&IT) executive editor, William Barns-Graham, advised traders to sign up to a free webinar from the IOE&IT next week which will include advice about how to manage these new post-Brexit requirements.
“Post-Brexit, administrative costs around submitting declarations and other documentary requirements have undoubtedly impacted UK trade,” he said.
“There are, however, solutions for businesses to better manage their new requirements while remaining compliant,” he added. “Next week’s free webinar will introduce some of these – including customs authorisations such as simplified declaration procedures.”
The webinar, titled ‘Managing the costs of international trade in 2023’, is taking place on 24 January 2023 at 11am. You can sign up to it for free here.
