The UK inflation rate has dropped to a three-year low of 1.7%, easing pressure on Chancellor of the Exchequer Rachel Reeves ahead of the upcoming budget.
The Office for National Statistics (ONS), reports that consumer price inflation in September stands at 1.7%, falling below the Bank of England’s 2% target for the first time since April 2021.
ONS Chief Economist, Grant Fitzner, noted that “lower airfares and petrol prices were the biggest driver for this month’s fall,” but this was offset particularly by rising costs in food and non-alcoholic beverages.
This slight victory arrives at a crucial moment for Prime Minister Keir Starmer and the aforementioned Reeves, who is in the process of preparing this month’s budget. Reeves has already emphasised that the budget will involve difficult choices, as she aims to implement tax increases and spending cuts totalling £40bn.
Labour has stated that it aims to minimise the negative impact on the working class through the budget. Chief Secretary to the Treasury, Darren Jones, believes that this inflation announcement will be welcome news for families.
“It will be welcome news for millions of families that inflation is below 2%,” Jones said. “However, there is still more to do to protect working people, which is why we are focused on bringing back growth and restoring economic stability to deliver on the promise of change”.
Since taking power, Keir Starmer’s Labour government has experienced a steady decline in inflation rates. Last month, the inflation rate held at 2.2%. However, with this month’s rate unexpectedly dropping below the 2% target, markets are increasingly betting on an interest rate cut at the Bank of England’s next meeting in November.
If the Bank of England lowers the base rate, it could pave the way for a year of growth in 2025. This would of course be a positive development not just for consumers but for various other industries, including fintech, payments and financial services.
The government has identified financial services as a key British growth sector, along with other industries such as technology and clean energy. The government has plans around both legislation and investment to ensure economic growth continues, with the UK economy finally growing this year after many years of stagnation and decline.
Plans for next year are already in motion, as Reeves announced the creation of the National Wealth Fund (NWF) and the British Growth Partnership during the International Investment Summit earlier this week.
Fintechs could be among those standing to gain from this, especially those in the startup phase. Investment is understandably critical to securing long-term success for many companies, though partnering with or being acquired by major banks is also common.
