WHILE the news inflation has fallen to zero per cent is welcome, Worcestershire small business owners don't expect it to last for long.
Judi Brazkiewicz, Federation of Small Business chairman for Worcestershire, said: "The confidence small businesses currently have will undoubtedly go a long way in their business investment plans. However, the fly in the ointment is the recently announced introduction of the National Living Wage, which employers will start to pay next year.
"Added to which, the final tranche of small businesses who must offer pensions to their employees will kick in over 2016/17, which will further increase the wages bill for employers. How are they going to meet those additional costs? I suspect most will have to put their prices up, so I don’t suppose we’ll see inflation flat-lining at zero per cent for very long.”
John Allen, FSB national chairman, added: "The small drop in inflation, along with the recent decision to keep interest rates on hold, will help to maintain business confidence. Our research shows that small firms are currently in a robust mood. Businesses are benefitting from both lower costs and increased consumer spending as lower food prices and rising real wages boost households’ disposable income.
“The current economic landscape puts businesses in a good position to invest in machinery, IT and staff training – all vital elements to address the UK’s productivity gap. To maintain these buoyant levels of confidence, the Bank of England needs to remain vigilant to ensure that the UK does not slip into a prolonged period of deflation.”
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