Government inaction on inflation leading to a drop in business confidence.

  • 17 September 2007
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ISME, the Independent Business Organisation has called for remedial action to be taken in the upcoming Budget in the wake of the latest inflation figures, which confirm that even though there was a slight reduction to 4.8% from 5% the previous month, the level of inflation continues to outstrip that of our EU colleagues, placing our trading businesses at a distinct disadvantage.


ISME Chief Executive Mark Fielding, commenting on the figures outlined, “In order to restore business confidence, which has waned in recent months, primarily due to economic uncertainty, rising interest rates, fluctuating oil prices and in particular a persistently high level of inflation, the government needs to get a firm grip on expenditure policy and ensure that the cost of living, at 4.8%, still among the highest in Europe, is brought under control. 

It is essential that this year's budget addresses the cost competitiveness issue and ensures that policies are introduced to bring the headline rate of inflation down to the average European rate, currently 1.8%.”

The reality is that Small and Medium Enterprises have been suffering under the constant barrage of cost increases, whether it is wage increases at twice the EU level, local charges and other production costs escalating at double digit rates. This scenario could have been avoided if the Government had taken the opportunity in previous budgets to properly address inflationary pressures in the economy, by focusing on areas that significantly impact on the business community, particularly local authority charges and public sector costs. On the contrary, increasing the level of current expenditure by 16% in the first half of the year, without any corresponding increased efficiencies in the public sector is only exacerbating the situation.
“It is apparent that strong inflationary pressures will continue to be embedded in the economy unless the Government introduces wage restraint and expenditure control in the public sector, which will help to ensure that increased costs for state services are dramatically reduced. This issue needs to be tackled “head on” in the upcoming Budget to ensure the protection of SME competitiveness and jobs”, concluded Fielding.