Nearly two-thirds of UK manufacturers expect to raise their prices in the run-up to Christmas after being hit by mounting cost pressures, a leading employers’ group has said.
The British Chambers of Commerce said inflation expectations had risen to their highest since its records began at the end of the 1980s, with 62 per cent of industrial firms planning price hikes over the next three months.
In its quarterly update on the state of the economy, the BCC said that, while activity had picked up, the recovery would have been stronger had it not been for supply chain pressures, labour shortages and rising costs.
The warning comes as the UK’s biggest bakery chain Greggs and the upmarket confectioner Hotel Chocolat reported evidence of growing price pressures.
The BCC said the “spiralling” cost of raw materials rather than higher wages was to blame for the price rises. Crude oil prices rose to a fresh three-year high of more than $82 a barrel on Tuesday while natural gas prices in Europe reached record highs.
Petrol prices on UK forecourts averaged just over 136p a litre on Monday – the highest in eight years.
Greggs, which has been affected by the nationwide shortage of HGV drivers, said it was facing shortages of staff and ingredients, adding that despite hedging, costs would rise in the lead up to Christmas.
Hotel Chocolat said prices would rise by up to 9 per cent on the majority of its ranges as a result of dearer ingredients, labour and transport.
Price pressures are affecting service sector firms as well as manufacturers, according to a separate survey from IHS Markit and the Chartered Institute of Procurement and Supply (CIPS).
The latest official cost of living data from the Office for National Statistics showed the annual inflation rate rising from 2% to 3.2% in August – its largest one month jump on record. The Bank of England expects a further increase to more than 4 per cent by the end of the year.
