Factory prices set to accelerate at fastest rate since mid-1970s as inflationary pressures bulge
Factory prices are set to soar at their fastest pace since the mid 1970s as inflationary pressures in the UK economy dial up, according to a closely watched survey published today.
A net balance of 77 per cent of British manufacturers intend to hike prices over the next three months, according to a survey by Britain’s chief business business group the Confederation for British Industry (CBI).
The fresh data adds to the growing body of evidence indicating inflation is certain to at least hit the Bank of England’s expected April peak of 7.25 per cent.
Some economists have forecast the rate of price rises topping eight per cent this spring, led by higher energy costs.
Higher prices for factory goods poses a risk of feeding through to consumer prices due to their wide usage throughout the economy.
Manufacturers have been hit by a sharp increase in raw material and transport costs, primarily driven by a supply crunch triggered by the global economy rebounding quickly from the Covid-19 crisis.
However, an easing in supply chain disruption helped factories secure inputs, boosting production volumes over the last three months.
Output volume growth accelerated to 26 per cent in the three months to February, up from 14 per cent last month, the CBI said.
Anna Leach, deputy chief economist at the CBI, said: “Manufacturers will be buoyed by strong order books and output growth, but amid ongoing cost pressures, almost 4 in 5 firms expect to increase prices in the next three months.”
Leach called on the government use the super deduction, which allows companies to net 130 per cent of their investment spending off their corporation tax liability, as a model to create a permanent investment deduction scheme.
“With high inflation dampening growth prospects in the wider economy, the Government must use the Spring Statement to help get businesses investing more, supporting higher growth, productivity and wages,” she said.
“That should start with a permanent Investment Deduction as a successor to the Super Deduction, which ends next year,” she added.