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UK inflation fell to 3.2% in the year to November, a bigger fall than expected and providing a further sign that the cost of living is easing.<\/p>\n
The cost of food and energy, which have been key drivers in price growth, are settling down and inflation is now at its lowest level for eight months.<\/p>\n
While inflation remains above the Bank of England\u2019s 2% target there is a broad expectation that interest rates will be cut tomorrow, with the only question being the size of the cut. Some analysts believe the sluggish economy should be enough to justify a 0.5% cut in the base rate.<\/p>\n
The fall in inflation and the likely rate cut has lead to a number of lenders cutting the cost of mortgages, while analysts say businesses will not see immediate benefits and will need more targeted help.<\/p>\n
George Holmes, managing director of business finance firm\u00a0Aurora Capital, said: \u201cA drop to 3.2% is welcome and bigger than expected, but small businesses won\u2019t suddenly feel a weight lifted. <\/p>\n
\u201cMost SMEs are still grappling with higher wage bills, increased supplier costs, and lower consumer spending. A reduced headline number is an encouraging direction of travel, but it won\u2019t immediately repair margins that have been squeezed for months.<\/p>\n
\u201cThe bigger impact is what it could mean for interest rates. This figure strengthens the argument for the Bank of England to cut the rate tomorrow, and any reduction would ease repayment pressure, improve confidence, and help unlock funding decisions that have been delayed while borrowing remains expensive.\u201d<\/p>\n
Mike Randall, CEO at Simply Asset Finance said:\u00a0\u201cLower inflation offers a small seasonal boost for the Chancellor, gently stoking the coals of optimism for businesses and helping move the economy in a more intentional direction.<\/p>\n
\u201cBut lower inflation alone won\u2019t sustain this trajectory. With the Budget now in the rear-view mirror, one of the Government\u2019s New Year\u2019s resolutions must be a more intentional approach to supporting businesses with access to finance and long-term investment. <\/p>\n
\u201cUK firms have remained resilient throughout 2025, as recent growth figures show, but that resilience cannot be taken for granted. Productivity \u2013 driven by better-equipped, better-financed businesses \u2013 will be what ultimately underpins a stronger, more sustainable UK economy.\u201d<\/p>\n
Tory shadow chancellor Mel Stride said that while he welcomes the fall in the inflation rate, prices are \u201cstill rising at well above the target rate\u201d.<\/p>\n
He said Labour stoked inflation with their Budget last year, which \u201chiked taxes and ramped up borrowing\u201d, adding: \u201cThis year, their Budget made the same mistake, raising taxes to pay for higher benefits spending.\u201d<\/p>\n
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