Tax increases proposed by Reeves may not lead to a rapid decrease in inflation, according to Smeg's prediction
In the ever-changing economic landscape of 2024, the UK arm of the iconic kitchenware brand, Smeg, has issued a warning about the potential delay in reducing inflation to the government's target of 2%.
The recent filing of Smeg's UK results with Companies House reveals these concerns. The brand, which is part of the wider Italy-headquartered company founded in 1948, has experienced a steady increase in turnover, with figures rising from £65.2m to £67.4m in 2024. However, the brand's pre-tax profit saw a more substantial jump, rising from £897,000 to almost £1.8m in the same year.
Despite this growth, Smeg has had to navigate a series of challenges. The volatile global shipping costs, particularly those heading towards the Suez Canal, have added cost and time delays to inbound products. These delays, while managed effectively by Smeg to maintain stock levels, have increased transport costs by 53% since 2023.
One of the specific challenges for Smeg's UK division has been the increase to employers' National Insurance contributions, which came into effect in April. This increase is causing concern within the company, as it is expected to maintain inflationary pressures, with the government's announced increase to employers' National Insurance contributions, effective in April 2025, further compounding the issue.
Inflation in the UK as of August 2024 stands at 3.8 per cent, and food prices have been rising for five consecutive months. These factors, combined with the ongoing challenges in global shipping, have led Smeg to believe it will be some time before inflation returns to the government's target of 2%.
On the same day, the Bank of England's Monetary Policy Committee (MPC) voted 7-2 to hold interest rates. While the specific member who voted against an interest rate increase was not identified, two members did vote for a cut, advocating for a deeper cut (50 basis points) or to keep rates unchanged.
Despite these challenges, Smeg remains optimistic about its future sales growth. The brand's iconic status and increasing appeal to a wider body of consumers promise continued success in the years to come.
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