For UK businesses, uncertainty has become the defining feature of the economic landscape

The decision reflects the MPC’s view that CPI inflation is expected to return back to target by April, but further evidence is needed.

What is striking, however, is how persistent uncertainty has become in shaping the UK’s economic outlook, and therefore, decisions by the Bank of England.

Inflation has ticked back up, wage growth remains strong, and businesses are still grappling with stubbornly high costs.

The British Chambers of Commerce (BCC) Quarterly Economic Survey (QES) shows that more than half of UK firms say inflation remains their biggest concern, and nearly three-quarters cite labour costs as the main pressure.

Wages, taxes, energy and raw materials are all pulling in the same direction, with more firms expecting to raise prices in the near future.

The labour market is sending mixed signals.

While unemployment has risen from post-pandemic lows, it remains historically tight by longer-term standards.

More people are looking for work, yet businesses are posting fewer vacancies.

And crucially for the Bank, earnings growth continues to remain strong.

That might cushion households, but it also risks keeping price pressures alive, particularly in services.

This is why talk of swift rate cuts may be “premature”. From the Bank’s perspective, easing too early could allow inflation to rise again just as it starts to ease.

At the same time, holding rates higher for longer risks weighing on growth and investment.

Domestic conditions are only part of the story. The UK economy remains highly exposed to global shocks, particularly uncertainty around US trade policy and wider geopolitical risks.

Ongoing trade barriers are another significant concern. Post-Brexit frictions with the EU continue to add costs and complexity to importing and exporting goods.

A small retail firm in Hampshire recently told us:

“The current Brexit-related constraints have brought high extra costs in importing goods from the EU. They have also limited our range – as many smaller EU suppliers do not wish to trade with the UK, due to the admin fees and complications.”

In today’s environment, uncertainty is no longer a temporary shock - it has become a defining feature of the economic landscape.

UK businesses need greater policy certainty and a clear path to lower borrowing costs to unlock investment, boost productivity and unlock trade.

For the Bank of England, caution remains the watchword. While interest rates may gradually fall this year, further evidence is needed that inflation is fully under control. In the meantime, households and businesses should anticipate that borrowing costs could remain high amid ongoing economic uncertainty.

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Caterina Batog is Research and Economics Analyst at the British Chambers of Commerce

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