Most firms expect prices to increase in next three months, says business group

Continued supply chain disruption, soaring inflation and rising energy costs causing businesses ‘huge headache’, reports Chiara Giordano

A record number of firms expect their prices to increase amid continued supply chain disruption, soaring inflation and rising energy costs, according to the British Chamber of Commerce (Getty Images)

A record number of firms expect to increase their prices because of the “huge headache” caused by supply chain disruption, soaring inflation and rising energy costs, a business group has warned.

The British Chambers of Commerce said its study of almost 5,500 companies found three out of five believed their prices would rise in the next three months – the highest proportion on record.

Two thirds of respondents cited inflation as a concern, also a record high, while one in four were worried about rising interest rates.

The BCC said its survey showed the recovery had “stalled” in recent months, with firms facing “unprecedented” inflationary pressures.

Manufacturers surveyed said they faced pressures to raise prices because of the cost of raw materials, other overheads, pay settlements or finance costs.

Some firms are still struggling to recover from large scale losses incurred since the start of the pandemic, said the BCC.

Head of economics, Suren Thiru, said: “Our latest survey suggests that the 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, 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 notable uptick in concerns over higher interest rates underscores the need for the Bank of England to proceed with caution on further rate rises to avoid undermining confidence and an already fragile recovery.

“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 UK’s growth prospects this year by eroding consumers’ spending power and squeezing firms’ profit margins and their ability to invest.”

Shevaun Haviland, director general of the BCC, added: “Our latest survey paints a challenging picture for the UK economy as we start 2022.

“Many businesses were facing a struggle to improve their cashflow and raise investment even before the Omicron variant surged and Plan B was imposed.

“Supply chain disruption is continuing to persist, inflation is soaring, and rising energy costs are presenting firms with a huge headache.

“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.”

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