North East businesses welcome lower than expected inflation

News that inflation is lower than expected has pleased a number of North East business leaders.

The consumer price index (CPI) measure of inflation increased to 2.9% in June from 2.7% in May, although it was widely expected to rise further.

Rises were tempered by slower annual rises in airfares and food prices as the Bank of England aims to keep CPI around 2%.

Mike Odysseas, managing director of Odyssey Systems said: “High inflation is bad news for business as it makes forward-planning more difficult. The figures, which are lower than expected and within the Bank of England’s target range, demonstrate George Osborne’s policies to get Britain back on track are working and I hope this will increase confidence in the economy and encourage growth.

“Although it’s important to keep inflation low, particularly as the economy recovers, I’d like to see businesses looking to British companies to provide them with services and products wherever possible, rather than outsourcing to developing countries in emerging economies where labour is cheaper.

“While this may see inflation increase slightly in the short term, the long term effect will be a stronger and deeper recovery. It is vitally important that businesses like my own, which are at the coalface of the economy, reinvest back into local and national markets wherever possible to ensure that the recovery continues.”

Jeremy Middleton, CEO of Newcastle-based investment firm, Middleton Enterprises, said: “As well as saving Mark Carney from writing a slightly embarrassing letter to the Chancellor, inflation figures staying within one percent of the Bank of England’s two per cent target – and considerably below the four to five percent range experienced in 2011 – is extremely encouraging for business.

“Even more encouraging is that this figure is expected by some economists to represent 2013’s highest point of inflation, which shows that stability is returning to the economy and signs of the recovery are filtering through to the real economy. This is a great time for businesses to invest and ensure that they are in the best shape possible, with capacity to expand, when the economy returns to full health.”

Andrew Wilkinson, partner at Tees Valley commercial property agent Sanderson Weatherall, added: “The rise in inflation is good news for those investing in the property market. The increasing number of people who have bought, or are seeking to buy, index-linked investments will see the growth to 2.9% as a strong indication of the wisdom of their choices.”