Manufacturers are continuing to raise both UK and export prices at record levels, a survey revealed on Monday, amid escalating inflationary pressures across the board which showed little sign of abating.
According to the Make UK/BDO first quarter manufacturing outlook survey, UK prices rose to a balance of 58% in the first quarter, from 52% in the final three months of 2021 – the highest balances in the survey’s history, and the fourth consecutive quarter with record numbers of companies increasing prices.
Given the survey was conducted before the invasion of Ukraine and the subsequent substantial increases in the energy costs and raw materials, Make UK said price increases were likely to have pushed even higher since then.
The survey showed a broad impact of escalating costs, with more than half of companies, or 54.2%, seeing a major increase in the cost of raw materials, and more than a third, or 37.4%, seeing a major increase in the cost of energy.
Almost 10% of companies said increases in both indicators represented a “threatening increase” to their business, with almost a quarter – 23.7% – saying it would take more than two years to resolve energy-related costs.
“While having fallen slightly in the first quarter, output and order balances remain at historically high levels,” said BDO head of manufacturing Richard Austin.
“However, supply shortages are severe, and we are seeing a worrying widening of the gap between supply and demand.”
Austin said manufacturers on the whole were currently managing to meet demand, but that would be difficult to sustain.
“Costs are rising at a speed that they cannot respond quick enough to and, combined with supply chain disruptions which will sadly now be exacerbated by the invasion of Ukraine, manufacturers will be turning to the Chancellor for immediate action.”
In response, Make UK said it was “urging” the Chancellor to use his upcoming Spring Statement to delay the planned increase in National Insurance, and look at other ways to ease business costs and boost investment.
It said that included reinstating business rates relief for small businesses, and bringing forward the improvement relief and investment relief exemptions by 12 months.
The organisation also wanted the Super Deduction scheme to be extended, with a view to making it permanent at the Autumn Budget.
“Companies are now facing eye watering increases in costs which are becoming a matter of survival for many,” said Make UK chief executive officer Stephen Phipson.
“While some of the increases are driven globally, the government cannot use this as a shield from the fact some are self-imposed and, added together, are now forming a perfect storm for companies.
“As a result, the most immediate priority for the Chancellor in the short-term must be to use his statement to do whatever it takes to support companies through this difficult period.”
Phipson said the alternative was to leave many businesses facing a tipping point, from which some would not recover.