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This is an abbreviated article by Liz Barclay – read the full article at Business111.com/news

Inflation is climbing again, and small businesses have little room for another squeeze. Higher costs threaten margins, while cautious customers make passing those increases on a difficult decision.

Figures released on 21 October show annual consumer price inflation reached 3.5% in September, up from 3.1% in August. Transport, particularly petrol and diesel, made the largest upward contribution to the increase.

Pressure at the pumps

Fuel matters well beyond the forecourt. Tradespeople travelling between jobs, firms delivering goods and businesses buying transported materials can all face additional pressure when running vehicles becomes more expensive.

The effect varies between businesses, and higher fuel costs do not automatically push every price up. But firms with limited margins must decide whether to absorb the expense, charge more or find savings elsewhere.

Underlying concerns

The increase extends beyond fuel. Core inflation rose from 2.6% to 2.8%, while services inflation increased from 3.4% to 3.7%.

Core inflation excludes energy, food, alcohol and tobacco, helping reveal price movements beyond those categories. It does not measure wages directly or prove that every domestic cost is accelerating, but its rise adds to concerns about persistent inflation.

The business reality

Consumer inflation measures household prices rather than the particular bills a business pays. A delivery company, café and building firm can therefore experience very different cost pressures despite facing the same headline rate.

For owners, the practical question is how much remains after paying suppliers, staff and overheads. Sales can hold steady while profits shrink, leaving less money for investment or unexpected bills.

The interest-rate dilemma

The figures strengthen concerns about inflation, but a rate increase remains a decision for the Bank of England. Policymakers must weigh persistent price pressures against evidence of weaker recruitment and subdued economic momentum.

Higher borrowing costs would add pressure to businesses using overdrafts or variable-rate loans. Holding rates would avoid that additional increase, but would not remove the costs already squeezing firms.

Small businesses cannot plan around a guaranteed rate cut or assume inflation will quickly fade. Updating cashflow forecasts, reviewing margins and checking the cost of borrowing will matter over the coming months.

Inflation is still a trading problem, rather than simply a national statistic. For the smallest firms, resilience depends on keeping enough cash available to withstand another difficult turn.

This is an abbreviated article by Liz Barclay – read the full article at Business111.com/news

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