UK companies hike prices at fastest pace on record as costs rise

Inflationary pressures stifle the UK’s economic recovery as companies hike prices at fastest pace on record

  • UK business growth was strong in September but hampered by rising costs
  • Shortages of staff, raw materials and transport led slowdown in new orders
  • Data suggests inflationary pressure could be less short-term than expected 


UK firms hiked prices at the fastest pace on record in September, adding to fears of soaring inflation, as rises in fuel, energy and staff costs were passed on to consumers.

While companies saw strong growth for the month, shortages of staff, raw materials and transport led to the slowest growth in new orders since shortly before the lifting of coronavirus lockdowns in early 2021.

The end of the tax break for home buyers at the end of September was also cited by some firms surveyed as a reason for the slowdown in new orders.

Companies saw strong growth in September but higher costs were passed on to consumers.

The IHS Markit/CIPS composite Purchasing Managers’ Index, which combines the UK’s services and manufacturing sectors, edged up to 54.9 from 54.8 in August, the first time it did not fall since May. A reading above 50 indicating expansion.

Around 34 per cent of firms reported an increase in output during the month, while only 13 per cent signalled a reduction.

Where firms saw higher levels of activity, this was attributed to strong consumer confidence and favourable business conditions after pandemic restrictions were lifted.

Where companies saw a fall in activity, they cited supply chain disruptions and shortages of staff, especially in the hospitality sector.

Job vacancies in the UK are currently at a record high, but a lack of candidates to fill vacancies and persistently high numbers of departing staff acted as a considerable brake on employment growth during September.

Input costs also rose sharply for services firms but they grew more slowly for manufacturers.

The data emerges as the Bank of England is squarely focused on recent inflation, which is so far looking less ‘transitory’ than the central bank had first insisted. As a result, the BoE last month said the case for an interest rate hike had strengthened.

In addition, IHS Markit, which compiles the data, said the data had yet to fully reflect the inflationary impact of Britain’s fuel crisis and surging energy prices.

Senior economic advisor to the EY ITEM Club Martin Beck said the ‘short-term acceleration’ of inflation is ‘squeezing living standards’ but ‘supply constraints should gradually ease’.

‘The recovery is unlikely to be brought to a halt by supply-side pressures.’

A reading above 50 indicates expansion and it was the first time the index did not fall since May

A reading above 50 indicates expansion and it was the first time the index did not fall since May 

Economics director at IHS Markit Tim Moore added: ‘The supply chain crisis put a considerable brake on recovery in the UK service sector during September.

‘Tight constraints on business capacity and rampant supply chain uncertainty meant that service providers have become more willing to pass on higher costs to customers.’

Commenting on the question of staffing issues, group director at the Chartered Institute of Procurement & Supply Duncan Brock said: ‘Though job creation was maintained in September, the services sector still had obstacles to overcome in terms of skills gaps and talent shortages as the competition for good employees deepened.

‘Whilst many paid higher wages to secure necessary skills, some others responded with redundancies as furlough support ended and operations were restructured, leaving a mixed employment picture.’



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