Almost a third (31 per cent) of businesses are expected to be able to raise their prices this month in response to inflationary pressures.
According to ONS figures, half of all businesses saw price rises in March but only 24 per cent could pass on these increases to consumers which in turn has hit their profit margins. The fortnightly study of around 9,000 businesses shows the rise from 39 per cent in February.
A sudden hike in energy costs is the main reason behind price rises, followed by increased raw materials and labour costs.
More than three quarters of hotels, restaurants and cafés reported price rises, with 42 per cent being able to put those price rises through to customers. Meanwhile, 27 per cent of IT companies said they experienced price rises, with 11 per cent being passed on to customers.
Construction costs are up 67.1 per cent with 31.6 per cent of costs passed on.
The Bank of England raised interest rates up by .25 per cent yesterday (5 May) and is now at 1 per cent. This aim of this measure is to curb inflation, which rose to 7 per cent and is expected to hit 10.25 per cent in autumn. It’s the first time since the Bank of England went independent in 1997 that interest rates have been raised four times in a row. Dr Tony Syme, macroeconomic expert from the University of Salford Business School, said the rise will not improve the cost of living crisis.
“The Bank of England is only making matters worse. It should focus on co-ordinating with the Treasury to boost business investment and raise productivity. That will help to raise living standards and keep domestic inflation low in the long run, while changes to government policies around skills training and migration could tackle the current labour shortage in the short run.
“A rise in living standards is driven by rises in productivity and these are sustained by business investment. But the latest figures for business investment show that it is still 8.6 per cent lower than it was in 2019 and, following a survey of its members, the British Chambers of Commerce recently revised downwards it projection for business investment growth in 2022 by over 30 per cent.”
Chirag Shah, CEO and founder of Nucleus Commercial Finance also said: “With consumer confidence already taking a nosedive, the next one to watch will be how surging costs impact businesses. SME business owners will be preparing for yet another tough year ahead, with fewer people willing or even able to spend, as well as a shortage of labour and supply materials. Introducing further financial support for these businesses is the only way they’ll survive the rocky months ahead – without stoking the fires for inflation.”