Inflation rise must not deflect government from tackling business costs - Chambers

Scottish Chambers of Commerce has told businesses north of the border to brace themselves for further rises in UK inflation as a result of the Brexit vote.

The warning came as the data from the Office for National Statistics yesterday showed annual UK consumer prices index inflation had risen from 0.5 per cent in June to 0.6 per cent in July.

The Scottish Chambers said the development must stop neither the Westminster nor Holyrood governments providing major economic stimulus.

Sterling weakness in the wake of the Brexit vote is expected to push up the cost of imported goods, raising consumer prices inflation. But the Chambers said that there remains room for additional government support for businesses, despite the upward pressure on inflation that will result from rising import costs.

Liz Cameron, chief executive of Scottish Chambers of Commerce, said: “Although inflation has nudged up slightly in the last month, it remains well below the Government target of 2 per cent. In the wake of the weakened value of the pound in the wake of the EU referendum vote, we would expect some upward pressure on inflation to emerge in the coming months as a result of the rising cost of imported goods. Nevertheless, it will be crucial for the UK and Scottish Governments to use their powers to stimulate the economy and support businesses.

“Economic growth must be maintained by enabling businesses to invest, and, in order to achieve this, Government must seek to address core business costs. In the run up to the EU referendum, we found that businesses were scaling back their capital investment plans, and there is a pressing need to turn this around. With a Business Rates revaluation scheduled for next year, the Scottish Government must use this fiscal lever to reduce one of businesses’ main costs.”