Over half of businesses set to increase prices

The 58% of businesses that reported the price increase in the British Chambers of Commerce’s (BCC) Quarterly Economic Survey (QES) is the highest proportion on record.

The survey, which features responses from 5,500 businesses reported that two-thirds, 66%, cited inflation as their main concern, which is also a record high, while one in four, 27%, were worried about rising interest rates which is up from 19% from the last quarter.

The percentage expecting an increase rose dramatically to 77% for production and manufacturing firms, 74% for retailers and wholesalers, 72% for construction firms, and 69% for transport and distribution firms.

The BCC said its survey showed that the recovery had ‘stalled’ in recent months, with businesses facing ‘unprecedented inflationary pressures’.

Manufacturers surveyed also stated that they faced pressure to raise prices because of the cost of raw materials, other overheads, pay settlements, or finance costs with some businesses still struggling to recover from large-scale losses incurred since the start of the pandemic.

The survey also found that 23% of businesses reported a decrease in cash flow with nearly half, 46% reporting no change. The BCC stated that as these figures were reported before the full impact of Omicron variant and the introduction of the government’s Plan B, the metric is a ‘cause for concern’.

Suren Thiru, head of economics BCC said: ‘Our latest survey suggests that UK’s economic recovery slowed in the final quarter of 2021 as mounting headwinds increasingly limited the key indicators of activity. The persistent weakness in cash flow is troubling because it leaves businesses more exposed to the economic impact of Omicron.

‘The record rise in price pressures suggests that a substantial inflationary surge is likely in the coming months. Rising raw material costs, higher energy prices and the reversal of the VAT reduction for hospitality are likely to push inflation above 6% by April.

‘The UK economy is starting 2022 facing some key challenges. The renewed reluctance among consumers to spend and staff shortages triggered by Omicron and Plan B may mean that the UK economy contracts in the near term, particularly if more restrictions are needed.

‘Rising inflation is likely to limit the UK’s growth prospects this year by eroding consumers’ spending power and squeezing firms’ profit margins and their ability to invest.’

Last week high street giant Greggs and Next announced that they were raising prices as they seek to offset higher wage and manufacturing costs. Next, which reported strong sales over Christmas, said its prices would increase by up to 6% next year while the UK’s biggest bakery chain announced that it would raise prices between 5p and 10p.

Shevaun Haviland, director general BCC said: ‘With companies now having to grapple with the impact of Omicron and further changes to the rules on imports and exports of goods to the EU, there are significant hurdles for businesses in the months ahead.

‘The government has listened to our previous calls for support, and it must do all it can to steady the ship and steer the economy through these uncertain times. If the current restrictions persist or are tightened further then a more comprehensive support package that matches the scale of any new measures, will need to be put in place.’

The BCC stated that the government’s focus needed to be on creating the ‘best possible environment for businesses to grow and thrive’ as by doing this would generate wealth, create jobs and support communities.

Haviland concluded: ‘That is by far the best way to sustainably deliver the tax revenue the government needs to support public services and the wider economy.’