Inflation drop ‘good news but cost of doing business a keen concern’

By Nikkie Thatcher

- Last updated on GMT

Rate reducing: inflation has fallen to 3.4% for February – down from 4% in January and December (image: Getty/Alphotographic)
Rate reducing: inflation has fallen to 3.4% for February – down from 4% in January and December (image: Getty/Alphotographic)

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UK inflation has fallen to 3.4% in the year to February 2024 – the lowest level in almost two and a half years, data from the Office of National Statistics (ONS) has found.

This has been welcomed by one trade body, alongside concerns around food and drink inflation​ remaining higher than the headline rate and the cost of doing business still being a concern for businesses.

While the ONS data didn’t specifically mention pubs, it did show the annual inflation rate for restaurants and hotels was 6% in February 2024 – down from 7.1% in January and the lowest rate since February 2022.

According to the ONS, the easing of the rate reflected a downward effect from restaurants and cafés, where prices increased by 0.7% on the month – less than the 2.1% between January and February 2023. This was largely driven by the prices of alcohol such as gin, whisky and various beers.

The ONS added the easing in the annual rate for restaurants and cafés was slightly offset by accommodation services, where prices rose by 5.3% in the year to February – up from 4.5% in January.

Furthermore, the slowing in the rate into February 2024 reflected downward contributions from nine divisions, partially offset by upward contributions from two divisions.

Keen concern

The largest downward contributions came from food and non-alcoholic beverages, and restaurants and hotels. These were partially offset by a large upward contribution from housing and household services.

The contribution from food and non-alcoholic beverages eased for the 11th​ consecutive month from a high of 1.76 percentage points in March 2023 to 0.48 percentage points in February this year.

British Beer & Pub Association (BBPA) chief executive Emma McClarkin said: “It is certainly good news the latest headline inflation rate for February has fallen from 4% to 3.4% but it is important to remember that doesn’t mean prices are coming down, it is prices are rising less quickly.

“The beer and pub sector will welcome this news but food and drink inflation​ remains higher than the headline rate and the cost of doing business, including affording sky high energy bills, still remains a keen concern for too many good businesses especially ahead of the April cliff edge of rising employment costs and business rates.”

Fellow trade body UKHospitality also welcomed the inflation drop and echoed the BBPA's concerns around price rises.

Significant milestone

Chief executive Kate Nicholls said: "Inflation falling to its lowest level in almost two and a half years is a significant milestone and I'm hopeful this trend will continue.

"We must not forget this still means prices are continuing to rise, albeit more slowly and hospitality businesses continue to face the brunt of those price rises.

"Yet more costs are being piled on in just under two weeks when both labour costs and business rates rise considerably.

"It's disappointing the Government is proceeding with an above-inflation increase in business rates and this, combined with wage increases, will pile the pressure on businesses that are trying to keep a lid on price increases for customers.

"I hope this drop in inflation will provide a boost in consumer confidence and also prompt further economic good news, particularly through a cut in interest rates."

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