British small and medium-sized enterprises are facing a fresh squeeze on margins after official figures revealed inflation jumped to 3.3 per cent in March, the first hard evidence of how the Middle East conflict is feeding through to the real economy.
Data released by the Office for National Statistics on Wednesday showed the Consumer Prices Index accelerated from 3 per cent in February, in line with City forecasts and marking the first uptick in the headline rate since December. It is also the first inflation reading to capture the surge in global oil and gas prices since hostilities erupted two months ago, with Brent crude up roughly 30 per cent and trading around the $100-a-barrel mark for several weeks.
The pain at the pump was unmistakable. Petrol rose by 8.6 pence per litre to an average of 140.2p, its highest since August 2024, while diesel, the lifeblood of the haulage and trades sector, leapt by 17.6p to 158.7p, a level not seen since November 2023. For the nation’s 5.5 million SMEs, many of whom rely on vans, lorries and company cars to service customers, it amounts to a significant and largely unhedgeable operating cost.
Air fares added further heat, climbing 10 per cent month-on-month against a 0.3 per cent fall over the same period a year earlier. That is the steepest February-to-March rise since 2016, although the ONS noted that prices were collected before the outbreak of war and were inflated by the timing of long-haul flights immediately after Easter.
Grant Fitzner, chief economist at the ONS, said: “Inflation climbed in March, largely due to increased fuel prices, which saw their largest increase for over three years. Airfares were another upward driver this month, alongside rising food prices. The only significant offset came from clothing costs, where prices rose by less than this time last year.”
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