How much could your business save?Find out now!
Or, you can call us on:0800 411 8830

What is deflation? What does it mean for small businesses?


The Consumer Prices Index (CPI) fell 0.1% in year to April 2015, according to the Office for National Statistics (ONS). What does this mean for UK SMEs?

As the ONS pointed out in their full bulletin, this is the first time the CPI has fallen over the year since official records began in 1996 and the first time since 1960 based on comparable historic estimates.

Deflation definition

A decrease in the general price level of goods and services like this is deflation and is unusual – these prices usually increase, which is inflation.

The major contributor to the current deflation are food prices, which fell by 3.0%, and motor fuel prices, which fell by 12.3%. The largest downward contribution came from transport services – notably air and sea fares – with the timing of Easter this year a likely factor.

ONS CPI April 2015 contributors to deflation

The falling price of oil is a main contributor to these reductions in prices. Oil prices are falling for several reasons, including weak demand for oil as European economies struggle to grow and major Asian economies slow down, and improved supply of oil, partially due to increased US production through fracking.

What deflation means for businesses

Many fear deflation as a symptom of economic ill health. But experts say that the UK’s brief slip into deflation is very different to the long periods of deflation, such as in Japan, that can turn into a prolonged economic depression (as seen in the 1930s).

In fact, the Chancellor, George Obsourne, was quoted in the Guardian as saying that “we should welcome the positive effects that lower food and energy prices bring for households at a time when wages are rising strongly, unemployment is falling and the economy is growing”.

The same positive effects may be seen for businesses. Lower food, fuel and energy costs will help many of Britain’s small businesses during an otherwise challenging period.

To take advantage of the current favourable prices UK companies should look to compare business energy supplier and lock in low business energy prices for the next two, three or four years.

SwitchMyBusiness.com can cut business energy bills by up to 70% with exclusive supplier rates. You could save thousands with a call that takes less than five minutes. For an impartial expert option, fill in the form at the top right of this page or call 0800 411 8830

Related Articles

Powerlines-into-sunrise

The Week’s Energy News – 09/12/2016

This week’s energy news covers an acquisition and a host of renewable energy stories. Drax buys Opus Energy ...

Read More
the state of renewable energy

The state of renewable energy – infographic

Renewables are big business, and are increasingly viewed as commercially viable, as well as kinder to the envi...

Read More
the week's energy news

The Week’s Top Energy News – 02/12/2016

The Christmas season has well and truly begun and, in true business style, you’ll either be incredibly b...

Read More
Excellent, 9.6 / 10

Excellent Service

"Many thanks to Anthony Pendleton, very courteous and polite, explained everything in right amount of detail and very helpful in sorting out the business utility switch. Would thoroughly recommend."

This review was posted by Nicola on the 28th of November 2016

Switch Electric

"Rachael Grindrod was excellent, very friendly and helpful."

This review was posted by Maria Allen on the 29th of November 2016

Uswitch electric

"Thanks to Jonathon Burgess who was a great help switching electricity for a charitable organisation. The process was complicated and his patience was appreciated as well as his proffesional attitude. We would not have completed the process without his help. Thanks Dawn"

This review was posted by Dawn Kerr on the 29th of November 2016

Great service from Rachel Grindrod. Thanks.

"Great service Rachel"

This review was posted by Craig Hewett on the 30th of November 2016

Easy to Switch

"Using SwitchMyBusiness made changing electricity suppliers easy. Thank you Anthony Pendleton for your professional approach with advising on which supplier to use."

This review was posted by Vanessa Gernat on the 01st of December 2016