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Record number of manufacturers increasing prices

Accelerating inflation is leading to more manufacturers raising their prices than ever recorded before, according to one quarterly survey, with price rises of around 10% now considered normal.

 


Accelerating inflation is leading to more manufacturers raising their prices than ever recorded before, according to one quarterly survey, with price rises of around 10 per cent now considered normal.

UK manufacturers are currently facing a ‘sharp inflationary spiral’ fed by a mix of ongoing and legacy disruptions to supply chains and a number of other issues. Experts say the problem shows no signs of abating anytime soon, despite previous predictions that inflation was set to fall back to pre-pandemic levels.

According to survey data for Q4 from Make UK and consultants BDO, a balance of +52 per cent of manufacturers reported a higher price for UK goods, with a further expected rise to +58 per cent in the next quarter. These are the highest figures recorded in the survey’s history, dating back 30 years.

To give an indication of just how sharply inflation has risen, the equivalent balance this time in 2019 was just +5 per cent. A balance of +51 per cent of manufacturers also reported an increase in the cost of foreign goods.

According to Make UK, anecdotal evidence from businesses suggests that price rises of around 10% are now a regular occurrence and are passing by “without a response from customers”, indicating that inflation is becoming built-in to decisions. Separate research focusing specifically on SMEs recently found that the cost of raw materials had increased by up to 350 per cent in some cases.

Commenting on the findings, James Brougham, Senior Economist at Make UK, said:

“While manufacturers will be able to enjoy some festive cheer this year, their spirits will be tempered by the eye watering impact of escalating cost pressures which are leading an increasing number to pass these on to the consumer. Given the global nature of some of these pressures there is little sign that they will abate anytime soon.”

Richard Austin, Head of Manufacturing at BDO, added:

“Manufacturers faced a brutal 10 per cent decline in output in 2020. This year, they rebounded proudly with some record-breaking figures. Orders and output are still very positive compared to historical figures, but cost pressures - input prices, labour, logistics and inflation - are setting in for the long haul.

“It’s a balancing act for manufacturers and we’re starting to see the impact of that in the form of more conservative expectations as we enter 2022.”

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