Most businesses expect price rise in three months, says leading business body

Economic recovery stalled in the fourth quarter of 2021, with firms facing “unprecedented inflationary pressures”, UK’s leading business body warned on Thursday (6).

According to BCC’s Quarterly Economic Survey (QES) – the UK’s largest independent survey of business sentiment and a leading indicator of UK GDP growth – 58 per cent of firms expect their prices to increase in the next three months, the highest on record while 66 per cent of businesses have cited inflation as a concern, also a record high.

One in four (27 per cent) firms were worried about rising interest rates, as concerns over rate hikes among manufacturers have reached record high, says the survey based on almost 5,500 firms.

Among the firms that expect the price rise, the figures are higher for production and manufacturing firms, retailers and wholesalers, construction firms, and transport and distribution firms.

Suren Thiru, the BCC’s head of economics, said sales growth stalled as firms struggled with the “mounting headwinds” of inflation, a scarcity of skilled workers, and problems sourcing products from overseas.

“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,” he said.

“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.

The BCC’s survey was released hours after the inflation issue dominated PMQs in the House of Commons.

Prime minister Boris Johnson told MPs it was “unquestionably going to be a difficult period” after Labour deputy leader Angela Rayner accused the government of a lack of action.

BCC’s survey findings come amid a series of reports showing that the UK economy is heading into a challenging spring, with a strong rise in consumer prices hitting household disposable incomes and denting consumer confidence.

Official figures showed the consumer prices index (CPI) jumped to 5.1 per cent in November following persistent increases in oil and gas prices and other commodities, including wheat and copper.

Last week, UK thinktank Resolution Foundation declared that households are set to face a hit of £1,200 next year, thereby, calling 2022 the “year of the squeeze”.