The UK’s inflation rate experienced a significant drop thanks to the Eat Out to Help Out initiative, which reduced restaurant prices. In August, the inflation rate plummeted to 0.2%, which is one-fifth of the previous month’s recorded level and the country’s lowest point in five years.
Additionally, the Office for National Statistics (ONS) credits the 15% reduction in VAT rates for the hospitality industry for contributing to the decrease in the inflation rate.
Is This Good or Bad News?
Low inflation rates can benefit the UK economy by slowing the rise of goods and services costs and lowering interest rates, which can help buyers and borrowers. However, savers will see much smaller returns on their savings due to this effect.
How Did the Eat Out to Help Out Scheme Help?
The government created the Eat Out to Help Out scheme, which ran every Monday, Tuesday, and Wednesday in August. It allowed restaurant and cafe customers to get a 50% discount on their food, up to £10. The government reimbursed the establishments for the discount, and over 100 million meals were claimed through the initiative. As a result of competition, restaurant and cafe prices were, on average, 2.6% lower than they were in August of the previous year, marking the first time that the ONS has recorded a negative price change since 1989.
Other Factors Contributing to the Price Reduction
The economy’s state also played a role in the sharp decrease in prices outside of the Eat Out to Help Out scheme.
