Almost three-quarters (72%) of transport and distribution firms expect to raise prices in the next three months – a record high, according to a survey.
The British Chambers of Commerce (BCC) Quarterly Economic Survey found the figure rose to 75% for production and manufacturing firms and retailers and wholesalers, while for construction it was 70%. Across all businesses the figure was 62%.
More than half of respondents (56%) cited overheads, mostly relating to energy and transport costs, as the reason for raising prices, followed by pay settlements (34%) and finance costs (19%). Nine in 10 (92%) manufacturers mentioned raw material costs.
Shevaun Haviland, director general of the BCC, said: “The level of inflationary pressures has soared to record levels and we are now truly in uncharted territory. Firms cite cost increases coming at them from all angles, ranging from energy bills to raw material prices and the imminent rise in National Insurance.
“We need to be absolutely clear: this cost-of-doing-business crisis is squeezing firms’ finances, driving further increases in prices and directly fuelling the cost-of-living crisis.
“The government must provide urgent financial support, through the expansion of the energy bills rebate scheme, to include small firms and energy intensive businesses, and [it] must introduce an SME energy price cap to protect smaller firms from some of the price increases.”
Meanwhile, the latest S&P Global/CIPS Manufacturing Purchasing Managers’ Index slumped to a 13-month low of 55.2 in March, down on 58 in February, amid supply shortages, client caution, geopolitical tensions and escalating inflation.
Input price inflation hit a three-month high, with firms citing transportation issues as contributing to higher costs. In turn, average selling prices rose at their fastest for three months.
Research on the link between freight rates and inflation has found the cost of shipping a container on ocean trade routes soared seven-fold in the 18 months following the beginning of Covid lockdowns in March 2020.
The IMF report said the inflationary impact of these higher costs was “poised to keep building through the end of this year”.
The research, based on data from 143 countries over the past 30 years, found when freight rates doubled, inflation rose by about 0.7%.
“Most importantly, the effects are quite persistent, peaking after a year and lasting up to 18 months,” said the IMF. “This implies that the increase in shipping costs observed in 2021 could increase inflation by about 1.5 percentage points in 2022.”
It added: “Moreover, the war in Ukraine is likely to cause further disruptions to supply chains, which could keep global shipping costs – and their inflationary effects – higher for longer.”
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