The UK inflation rate fell to 0.2% in August from 1% in July as a result of the Eat Out to Help Out scheme implemented during the month of August, which ran from Monday to Wednesday and offered 50% off food up to the value of £10. More than 100 million meal discounts were claimed through this scheme.
Restaurant prices were 2.6% lower than in August last year, with a cut to the rate of VAT helping to drive prices lower. The VAT cuts last until January 12 next year and was introduced on food and non-alcoholic drinks as well as accommodation and admission to attractions.
For restaurant owners, this scheme increased the number of bookings they were taking and provided relief for the difficult months previously had. Having to reduce capacity to be able to adhere to social distancing rules, many restaurants were struggling financially but the Eat Out to Help Out scheme allowed them to increase the number of customers and therefore boost profits.
Economists predict inflation is likely to remain lower than its 2% target, except in the case of a further sharp fall in the value of the pound – for example, after a disorderly end to the post-Brexit trade talks.
It has also been found that – over the past 3 months – inflation has exceeded growth in pay. On top of this, economists predict a fall in weekly earnings of approximately 3.5%.