Tina McKenzie, Policy Chair, Federation of Small Businesses says any easing in inflation brings relief to small firms, and the reported drop is a step towards reducing interest rates by the summer.
But she added it was important not to discount the cumulative damage done to small businesses’ margins and cash reserves by inflation having been so high for so long.
“With the fall reported today driven largely by falling food prices for consumers, the hope is that this will ease some of the pressures on household budgets, to the eventual benefit of small firms in consumer-facing sectors.
“Small firms ended last year with a decrease in confidence levels, indicating that this first quarter would be tricky in many respects. However, many of the key economic indicators published so far have been a slight improvement compared with 2023, giving rise to a feeling of cautious optimism.
“In order for any optimism to be nurtured, the promising start signalled by the increase in the VAT threshold to £90,000, the announcement on apprenticeships from the start of the week, and the business rate relief for small firms in the retail, hospitality and leisure sectors should be built on.
“What unites these growth-promoting measures is that they are targeted where they will have the most impact: on small firms, who are the ones with the potential to expand and kick the economic recovery into a higher gear.
“Measures to ensure employment levels are maintained and improved are also needed. Wage inflation has eroded the Employment Allowance’s relative value, underlining the need for it to be uprated, especially with the impending rise in the National Living Wage. This will help small employers keep people in work, and to grow their workforce.
“Politicians and policymakers should remember that small firms have been the driving force behind our recovery from past recessions, and this time around it’ll be no different, if they are given the right conditions to start up, scale up, and prosper.”
