Lloyd Powell, Head of ACCA Cymru/Wales, said:

“Today’s increase has been expected, but it may well still come as a shock to the UK’s SMEs which account for 99% of all UK businesses.

“The pandemic has caused a huge amount of strain on small business’ finances, with them having taken on £213bn in debt to survive over the last two years.

“It remains to be seen if this move will curb inflationary pressures, which SMEs are having to face alongside rising costs, including the planned health and social care levy due to take effect from 6 April 2022. It’s a tough trading environment for SMEs, especially with increases in prices along supply chains and squeezed household real incomes.

“So, looking ahead, a big economic risk is that inflation stays higher for longer, partly because of these prolonged supply shortages. Upside surprises to inflation would trigger a greater degree of monetary tightening. The effect would be slow global economic growth, preventing a return to its pre-pandemic trend.”