Two in three UK firms expect to raise prices in Christmas run-up: Poll

Almost two-thirds of manufacturers in the UK plan to raise their prices in the run-up to Christmas after coming under mounting cost pressures, according to the latest quarterly survey by a leading employers’ group.

The country’s inflation expectations have increased to their highest level since its records started at the end of the 1980s, the British Chambers of Commerce said, noting 62% of industrial firms are planning to raise prices over the next three months.

The BCC said the “spiraling” cost of raw materials was responsible for the price hikes. Crude oil prices increased to a fresh three-year high of over $82 a barrel on Tuesday while natural gas prices in Europe hit record highs.

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“Acute supply shortages and rising raw material costs drove an historic surge in inflationary pressures in the third quarter," said Suren Thiru, the BCC's head of economics.

The share of BCC member companies, which reported higher domestic sales from July to September went up to 47% from 44% in the second quarter, which Thiru said indicated a "disappointingly modest uptick."

According to the survey, 27% of companies invested in the third quarter, unchanged from the previous three months, which the BCC said was "another troubling warning sign for longer-term recovery."

“The supply chain crisis, alongside wider labour shortages and spiralling price rises, is clearly starting to drag on our economic recovery from Covid-19,” said Shevaun Haviland, the BCC director-general.

“Businesses are being battered by a deluge of upfront cost pressures, including huge increases in the prices of key raw materials and shipping, as well as now facing a rise in national insurance contributions. At the same time, they are losing out on opportunities for growth due to the labour shortages, despite many already raising wages and offering training.”

The UK’s biggest bakery chain Greggs said it was facing shortages of staff and ingredients. Greggs, which has been affected by the nationwide shortage of HGV drivers, added that costs would rise in the lead up to Christmas despite hedging.

Upmarket confectioner Hotel Chocolat also reported evidence of growing price pressures. It said prices would increase by up to 9% on the majority of its ranges as a result of dearer ingredients, labour and transport.

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Many British companies have paid higher wages to secure necessary skills, according to Duncan Brock, group director at CIPS.

Other firms had to make staff redundant as furlough support ended and operations were restructured, Brock added.

“As prices charged rose at their fastest rate since 1996, it seems the floodgates are open for higher inflation to wash through the UK economy and firms fear the growth this month may be eroded further by higher costs and shortages as we move towards the festive period,” Brock said.

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