News sources are reporting this week that the UK inflation rate has risen for the first time in ten months. What does this mean for the country’s economy and what could it mean for you if you’re thinking of selling your business right now?
The Importance of Inflation Rates
Inflation rates are a pretty important benchmark for the business community. They’re basically the percentage that prices are rising above wages. Generally, if an interest rate rises, it means that the public are paying more for goods and services, which could either be good or bad for business, depending on the circumstances.
For the past ten months, inflation rates have either stayed flat or have fallen due to a number of factors. These include the economic recovery, the interest rate policy put in place by the Bank of England (holding their benchmark interest rate at 0.5%) and wider gains in the global economy.
Inflation Rise by 0.2%
However, it is now being reported that the Office for National Statistics (ONS) has announced that the national inflation rate has risen for the first time in ten months according to the Consumer Prices Index (CPI) – the country’s main measure of inflation, which charts it based on commercial performance. Specifically, the ONS reported that it rose to 1.8% in April, a 0.2% jump from the 0.6% recorded for national inflation in March.
According to the national statistics expert, inflation has risen due to higher transport costs, including air and sea travel. However, they also noted that inflation measured by the Retail Prices Index (RPI), the country’s other tool for measuring inflation, stayed level. They also suggested that rats on the CPI were likely pushed up due to the costs traditionally attached to the Easter Holidays, which were later than usual this year.
Furthermore, the ONS went on to note that travel costs were pushed up by a hike in petrol prices, but that these rises were offset by a fall in food prices, and that despite the rise, inflation still sits below the 2% target set by the Bank of England.
RTA Business Comments
So what does this mean if you’re looking to sell your business? At RTA Business, we recognise that the strength of the recovery means it’s a fantastic time to profit off the sale of your business and the fact that inflation still sits below 2% means that this hasn’t changed.
Data released by the Office of National Statistics (ONS) this week has revealed that the business community has significantly contributed to the UK’s economic growth. What does this mean for the business acquisition industry?
Increasingly the ONS has come out quoting data that has led industry experts to correlate a rise in GDP growth to sustained economic recovery and this week’s findings have further fostered that belief. The government body listed business investment as a significant contributor to GDP growth.
Specifically the ONS confirmed that the national economy has grown by the rate it had already predicted, 0.7%. However for 2013 as a whole the estimate was cut from 1.9% to 1.8%. This was more conservative than industry experts had hoped.
As for business investment, it saw a surge of 2.4% in the final quarter of 2013 from the figure recorded for the third quarter. As for annual figures, business investment saw a meteoric 8.5% rise from the year before.
This has led experts across the industry to tout business investment as a significant factor in the growth experienced by the UK in the closing quarter of 2013. However other factors, including a rise in household spending of 0.4% also contributed to the boosting of the economy.
David Kern, chief economist at the British Chambers of Commerce commented that these latest figures from the ONS were “positive news” and that they would have a strong impact on business confidence.
However Kern was also quick to note that “while it is encouraging that consumer spending is growing, we need to rely more on investment and net exports. These figures show a small move in the right direction, but there is still more to do.”
Neil Prothero, deputy chief economist at manufacturers’ organisation EEF joined in commenting on what the figures mean for the UK business industry. He determined that a key issue is whether businesses would be able to turn “investment intentions to concrete action”.
He then elaborated the point, arguing that “next month’s Budget must send out a powerful signal that government will continue to act on delivering a competitive business environment that will give the private sector confidence to invest.”
What is clear from these figures is that British business is stronger and is contributing more to the national economy than it has since the recession. This means that as businesses continue to expand they will be looking to acquire smaller businesses to build up operations.
At RTA Business we’ve always understand that business acquisition is cyclical. Business investment boosts the economy, which creates favourable conditions for expansion which facilitates business acquisition which contributes to the economy.