Governments must act to tackle business costs and boost investment – Scottish Chambers

With UK inflation unchanged at 0.6 per cent in August, the Scottish Chambers of Commerce has again warned of further inflationary pressures in the months to come and called for action to address business costs.

Economists had forecast inflation would rise to 0.7 per cent, predicting the cheaper pound would push prices higher.

Following the news, the Chambers renewed its warning about inflationary pressures caused by higher import costs arising from sterling’s post Brexit vote plunge, after the data showed the annual rate of increase of factory gate prices more than doubled in August.

The data, published by the Office for National Statistics, showed annual UK factory gate price inflation surged from 0.3 per cent in July to 0.8 per cent in August.

The overall price of materials and fuels bought by UK manufacturers for processing rose 7.6 per cent in the year to August, compared with a rise of 4.1 per cent in the 12 months to July.

Liz Cameron, Chief Executive of the SCC, said: “Last month, we warned that the current low rate of inflation is likely to come under pressure due to higher import costs in the wake of the fall in the value of the pound following the EU referendum decision. This month, we have seen the prices of goods bought and sold by manufacturers rise by 0.8%, the second monthly increase in succession and further evidence that cost increases are likely to feed through sooner or later into consumer prices.

“At the moment, businesses seem to be absorbing some of this cost and that is likely to have a negative impact on investment decisions. This is all the more reason for our Governments at a UK and Scottish level to use their upcoming Autumn Statement and Budget respectively to lower core business costs and to boost competitiveness across as wide a range of businesses as possible.

“In particular, the potential cost rises for many businesses that will come as a result of next year’s Business Rates revaluation must be tackled now before the damage is done next April, risking making Scotland an even less competitive place to do business.”