Inflation slowing but remains strong, say accountants BDO

Inflation is still rising rapidly, but has fallen to its lowest point for a year, a poll of polls by accountancy firm BDO has suggested.

BDO’s inflation index dropped by 2.19 points, the consultants said, dropping to 110.99 points. A score above 95 means that inflation is growing.

It is the lowest score since March 2022, but still high by historical standards as the cost of living continues to bite households and costs rise for businesses.

The drop was mainly driven by a fall in what BDO calls the input inflation subindex which tracks the prices that businesses face when producing a product or a service.

It’s encouraging to see business optimism leading to renewed hiring intentions once more as businesses see input price and supply chain pressures ease slightly

BDO said that pressures in companies’ supply chains had eased and wholesale energy prices have fallen, taking some of the pressure off.

But it does not mean that businesses are out of the woods. At the start of this month, the support that they have been getting from the Government to help with runaway energy bills was slashed.

There were also a series of changes to the tax regime, some of which will put pressure on some companies.

“It’s encouraging to see business optimism leading to renewed hiring intentions once more as businesses see input price and supply chain pressures ease slightly,” said Kaley Crossthwaite, a partner at BDO.

“Improvements in the output and inflation indices will only lead to a better outlook, as they work to drive growth and leave signs of a downturn in the past.

“However, with the less generous Energy Bills Discount Scheme now in place and expectations of a recession remaining, the economy is likely to face further headwinds despite recent resilience. Businesses need as much certainty and support as possible to continue weathering the persistent challenges ahead.”

The survey also contained worse news for regular householders. The consumer inflation subindex rose to a three-month high of 118.53, BDO said, a rise of 1.41 points.

It happened as consumer price index inflation (CPI) rose steeply in February, especially in the food and hospitality sectors.

The BDO indices look at several different surveys, including ones from the Confederation of British Industry, the Bank of England, IHS Markit and CIPS as well as others.

A Government spokeswoman said: “We have been helping businesses throughout the winter with £5.6 billion of support, enabling some to only pay around half of the predicted wholesale energy costs.

“Global energy prices have fallen significantly and are now at their lowest level since before Russia’s illegal invasion of Ukraine. The new level of government support reflects this welcome fall in prices, but we will continue to stand by businesses, as we have done over the winter.”