Inflation will cause long-term pain for businesses and taxpayers
The increase in annual inflation (CPI) to 3.5% for the year to April 2025 was inevitable after the changes made by the Chancellor, Rachel Reeves in the 2024 Autumn Budget, say leading audit, tax and business advisory firm, Blick Rothenberg.
Robert Salter, a Director at the firm, said: “In the Autumn 2024 budget, the Chancellor announced an increase in the rate of employer’s National Insurance Contributions (NICs) to 15% and a significant 6.7% increase in the National Minimum Wage (NMW), which both applied from April.”
He added: “It was inevitable that employers would pass on these cost increases to the general public in the form of higher prices in areas such as energy, and retail, which led to inflation jumping to 3.5% for the year to April 2025.”
Robert said: “The headline rate of CPI growth will hopefully fall in the coming months as the initial impact of the rising costs for employers dissipates, but taxpayers right now will be feeling the impact, as the higher NIC and NMW which pushed up prices are unlikely to be reversed by the Government, meaning prices continue to remain high.”
He added: “But higher prices are only half the problem for taxpayers, as organizations who haven’t been able to pass on cost increases via higher prices to consumers, will try and reduce future pay rises to employees and be less likely to replace employees who leave the company, increasing unemployment or underemployment over the coming months.”
Robert said: “Charities in particular will struggle as will smaller businesses without the ‘market muscle’ to readily increase their sale prices or reduce their staffing costs. The rise in inflation will continue to cause problems for the UK economy and the general public unless the Government changes course to ease the financial pressure on businesses.”
