A record number of companies are planning to raise prices because of supply chain disruptions and increased raw material and energy costs, a closely watched survey has revealed.
According to a poll from the British Chambers of Commerce, 58 per cent of firms expect to charge their customers more for goods and services over the next three months, 1 per cent anticipate cutting prices.
The reading is the highest in the history of the BCC survey and will intensify concerns that inflationary pressures are building even before the predicted rise in electricity and gas bills in April. The BCC surveyed 5,487 businesses online between November 1 and 22, before the emergence of the Omicron variant, the government’s Plan B restrictions and the Bank of England’s decision to increase interest rates from 0.1 per cent to 0.25 per cent.
Factory owners are the most likely to increase their prices. Some 77 per cent of production and manufacturing firms are preparing to raise prices, with 74 per cent of retailers and wholesalers and 72 per cent of construction firms set to follow suit.
Some 94 per cent of manufacturers cited raw materials costs as a concern, with firms reporting wage inflation and higher finance costs as other factors forcing them to bump up prices.
The BCC said its survey showed that the recovery had “stalled” in recent months because of the “unprecedented” pressures on overheads. Some firms are still struggling to recover from heavy losses incurred since the start of the pandemic, it added.
The lobby group warned that the economic recovery had slowed in the final three months of last year. Some of its members had reported a “troubling” weakness in cash flows, which left them “more exposed to the economic impact of Omicron, rising inflation and potential further restrictions”.
“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 per cent by April,” the BCC said.
Firms had become “notably” more concerned over the prospect of higher interest rates and the BCC urged the Bank of England to take a “cautious” approach to tightening policy so as to avoid “undermining confidence and an already fragile recovery”.
The lobby group warned that the economy could contract in the coming months because of the “renewed reluctance” among consumers to spend and staff shortages.
Rising inflation would cloud the economy’s growth prospects this year by reducing consumers’ spending power and squeezing firms’ profit margins and limiting their ability to invest, the BCC added.
The survey showed that investment in plant, machinery or equipment flatlined in the fourth quarter. Some 29 per cent of respondents said they had invested more during the period, with 60 per cent reporting no change, and 11 per cent cutting investment.
Shevaun Haviland, director general of the BCC, said: “Our latest survey paints a challenging picture for the UK economy as we start 2022.”
She added: “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.”