Fall in inflation will be slower than expected.

16th October 2012

Business rates will increase by 2.

6%, pegged to September's RPI figure Annual CPI inflation was 2.2% in September 2012, down from 2.5% in August Annual RPI inflation was 2.6% in September 2012, down from 2.9% in August  Commenting on the inflation figures for September 2012 published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: -Many expected a fall in inflation in September, but it the decline was smaller than predicted. The decline seen in this month's figures is largely down to significant price increases a year ago when inflation reached a peak for both consumer and retail prices. While we expect inflation to fall in 2013, the expected increase in consumer and retail price inflation in October is concerning. Some of the recent announcements of increases in utility prices and university tuition fees will only affect the October index. -A fall in CPI to 2% or possibly lower is unlikely to occur until the second quarter of 2013, later than was generally predicted. Uncertainties around world energy and food prices could delay the decline in UK inflation even further. Falling inflation benefits the UK economy as it reduces the squeeze on businesses and consumers and underpins domestic demand at a time of fiscal austerity and weak growth in the global economy. With this in mind we believe that the Bank of England should not use additional QE to limit the fall in inflation. Instead the MPC and the government should concentrate on measures that directly support growth and boost lending to businesses. Commenting on the impact of the inflation figures on business rates from April 2013, Dr Adam Marshall, Director of Policy at the British Chambers of Commerce (BCC), added: -Once again it is Britain's businesses, large and small, that will pay the price for an inflexible system that links business rates to September's inflation figures each year. Companies now face a 2.6% increase in their rates bills from next April, over and above the stonking 5.6% rise they've had to endure in 2012. Incessant rates rises add to businesses' operating costs at precisely the time that ministers should be doing whatever they can to hold these costs down in the interests of growth and jobs. It would be cynical and damaging of the government to continue to freeze council tax while allowing business rates to spiral ever further upward.