Inflation is back on the rise, according to new figures – but what could this mean for dentistry?
Statistics released this week by the Office for National Statistics (ONS) show that inflation increased to 2.3% in October. This marks a significant increase on the 1.7% in September.
This means inflation is back above the Bank of England’s target of 2% – the highest it has been in six months. The hike is mostly due to increased electricity and gas prices after the energy cap went up on 1 October.
We take a look at what this could mean for the UK economy and the impact it could have on dental professionals – and their patients.
Delays likely for interest rate cuts
This month, the Bank of England cut rates for the second time this year from 5% to 4.75%.
The next and final meeting of the Monetary Policy Committee in 2024 – which is responsible for setting the base rate – is scheduled for 19 December.
With inflation increasing, it means a third cut this year looks a lot less likely. Looking into 2025, the Bank of England may favour a more cautious string of smaller cuts, with many predicting the base rate to sit around 3.5% by the end of 2025.
Among other things, this could mean mortgage and loan repayments remain higher for longer, both of which could have an impact on dental clinicians’ personal and professional finances.
Cost of living is here to stay for now
We are all tired of hearing the words ‘cost of living’ but it seems that is is not quite over – despite some earlier signs that things were improving.
As a result of budgets being squeezed, many consumers will turn to recessionary behaviours such as trading down or cutting back on spending.
This could mean that patients are more cautious when committing to treatment plans, particularly non-essential aesthetic work.
If they do opt for treatment, however, they may shop around more when it comes to choosing a dental practice, taking a more critical look at price and value for money.
Inflation could continue to rise (but not too high and not too much)
According to predictions from KPMG, UK inflation could rise to 3% in early 2025, putting further pressure on people’s spending power.
However, it expects it to gradually moderate and return to target by the end of 2025.
Prices are also rising at a far slower rate than we have seen in the last few years; in October 2022, inflation hit 11.1%.
Further rate reductions ‘highly unlikely’
Iain Stevenson is head of dental at Wesleyan Financial Services. Speaking to Dentistry.co.uk, he believes better mortgage rates are on the horizon – but warns of costly borrowing in the short term.
‘While this was a relatively small rise in inflation, it’s likely to have a significant bearing on the immediate path of interest rates,’ he said.
‘The Bank of England has been proceeding very cautiously with rate cuts and is now highly unlikely to make further reductions this year.
‘In the short term, this means dentists will continue to shoulder relatively high borrowing costs, which could make any plans they have for investment in equipment or premises in the new year more costly than they’d hoped.
‘Mortgage rates have been coming down and this month’s rate cut means we’re probably going to see better deals coming to market in the next few weeks. Any further improvements will hinge on the base rate.
‘For any dentist thinking about getting on, or moving up, the property ladder soon, it’s worth speaking to your financial adviser to see what the right options are, as we are still in an uncertain environment.’
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