UK inflation slowing but still strong, survey shows

A poll by BDO shows that inflation is at its lowest point in a year

Shoppers on London's Regent Street on Tuesday, April 4. Photographer: Hollie Adams / Bloomberg

Inflation in Britain remains strong, despite having fallen to its lowest level for a year, according to a poll by accountancy firm BDO.

BDO's inflation index has dropped by 2.19 points to 110.99 points. A score above 95 means that inflation is growing.

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

BDO creates its indices by taking data from several surveys, including ones from the Confederation of British Industry, the Bank of England, IHS Markit and CIPS, as well as others.

Fresh produce for sale at a market in London on March 31. While BDO's survey shows inflation at its lowest point in a year, it remains strong. AFP

'Further headwinds'

The drop was mainly driven by a fall in what BDO calls the input inflation subindex, which tracks the costs companies pay when producing a product or a service.

BDO said that improvement in supply chains and a fall in wholesale energy prices have taken some pressure off the costs of production.

However, companies still face a difficult time, given the changes to energy subsidies and the tax regime that came in at the beginning of April.

“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.”

Households still struggling

For households, the BDO survey had little respite in terms of inflation. The consumer inflation subindex rose to a three-month high of 118.53, a rise of 1.41 points.

It happened as the consumer price index inflation rose to 10.4 per cent in February from 10.1 per cent in the month before. The Office for National Statistics said the rise was largely caused by upwards price pressures in the food and hospitality sectors.

The next official UK inflation figures are due on April 19.