Price Increases Expected in the UK

The British Chambers of Commerce (BCC) announced publication of new research showing a growing number of firms expect prices to rise significantly in the coming months. The figures also document increasing concern among businesses about rising inflation. Data from responses by more than 5,800 firms shows that in the first quarter of 2021, 2 in 5 businesses (38%) expect to see price increases in the next three months. In the previous quarter, this share stood at 25%. By contrast, only 5% of firms expect a decline. The figures also show that those viewing rising inflation as a concern in the coming months have risen from one in four (25%) in the previous quarter to one in three (30%) in the current quarter. The balance of manufacturers expecting their goods prices to rise in the next three months (the percentage reporting increases minus those reporting declines) climbed to 46% from 27% in the previous quarter. This indicates that price rise expectations are now at their highest level since the post-referendum sterling devaluation pushed UK consumer price inflation to 3%, that is, since Q4 2017. While some firms point to ongoing Brexit disruption and Covid-19 interruptions, raw material costs are cited as the main driver of rising prices for manufacturers. 87% of the production and manufacturing sector and 72% of construction firms cited 2021 first quarter raw material prices—up 80% and 67% respectively from the previous quarter—as the reason.