Why UK firms need to see a tax roadmap during 'awful April': Greg Wright

As Danni Hewson, AJ Bell’s head of financial analysis, observed, these figures seem almost redundant when we consider the price rises imposed at the start of April, which are expected to push inflation higher than anybody would like.

She added: “Those price hikes will have been offset for some by the rise in the National Living Wage and increases to the state pension and benefits, which is another consideration for those MPC (Bank of England Monetary Policy Committee) members who will have to make their decision about where interest rates go next ahead of April’s inflation data.’’ she added.

“It’s an unenviable task made even more difficult by the battering from what some have now dubbed ‘Storm Donald’ as the US president’s messy tariff policy wreaks havoc with the global economy.

She added: “At 2.6 per cent inflation is ahead of the Bank’s 2 per cent target but it’s likely to be sufficiently low to give rate setters the green light to keep cutting the base rate, with markets currently pricing in an 85 per cent chance of a quarter percentage point cut at the next meeting.

“The bigger question is where do rates go next? We know increased household costs will colour next month’s data but Donald Trump’s tariff policy could potentially result in a dumping of lower priced goods on UK shores. Concerns about global growth may keep the oil price subdued, though homegrown issues like increased labour costs could result in a significant fall in employment and lower wage growth.”

Many economists believe inflation will shoot higher in April as consumers struggle with higher bills, as well as the potential impact of increased taxes and labour costs for businesses, which are likely to pass some of the costs on to customers.

Nathaniel Casey, investment strategist at wealth manager Evelyn Partners, said the UK continues to face stickier inflationary pressures than a number of other advanced economies. This has been reflected in the bond market, with UK gilt yields remaining significantly higher than their European counterparts such as German bunds, despite both markets facing a similarly weak growth profile.

Stuart Morrison, the research manager at the British Chambers of Commerce, (BCC) said many businesses fear the latest small drop in the rate of inflation is just the calm before the storm. Some factors are beyond the Government’s control; it can't for example, tell President Trump how to conduct economic policy. But it can listen to the BCC and provide a tax roadmap, giving firms an idea of when business rate and national insurance pressures will ease. Flickering candle light is always better than pitch darkness.

Greg Wright is the deputy business editor of The Yorkshire Post