UK businesses are buckling under the weight of costs swelling at the fastest pace on record, according to a closely watched survey released today.
A toxic combination of supply chains wilting, demand for goods and raw materials running red-hot and crippling worker shortages have propelled businesses’ costs.
The November increase in average cost burdens was the fastest since IHS Markit / CIPS, the organisations who produce the Purchasing Managers’ Indexes, started tracking the data in January 1998.
Despite swelling costs, both the UK’s services and manufacturing industries registered strong growth, with each PMIs reading for the respective industries coming in at 58.6 and 58.2 for November.
The composite PMI came in at 57.7, slightly below analysts’ forecasts and down marginally on the previous month, but still above the third quarter average.
A reading above 50 indicates growth.
The elevated growth figures prompted a flurry of experts to bet on the Bank of England hiking rates at its next meeting on December 16.
“A combination of sustained buoyant business growth, further job market gains and record inflationary pressures gives a green light for interest rates to rise in December,” said IHS Markit’s chief business economist Chris Williamson.
Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, said the strong growth figures would “reassure wavering MPC members that the economy can withstand a modest increase in interest rates.”
The record cost rise indicates inflation could be much more entrenched in the UK economy than first thought, particularly if businesses hike consumer prices to offset expected future margin pressure.
A de-anchoring in medium term inflation expectations has been pinpointed by the Bank of England as the biggest threat to inflation remaining elevated in Britain.