UK factories are hiking prices at the fastest pace on record as firms scramble to protect their margins amid a cost onslaught, reveals a closely watched survey released today.
British manufacturers lifted prices at the quickest pace ever recorded by IHS Markit, the organisation that complies the purchasing managers’ index (PMI).
Input price inflation hovered around the highest ever recorded by IHS Markit.
“There were reports of higher costs for chemicals, electronics, energy, food products, metals, timber and wood. Freight, shipping and air transportation costs were also higher,” IHS Markit said.
The latest PMI indicates headline inflation is likely to trend higher in the coming months as consumer businesses also raise their prices to offset higher costs of sourcing inputs from factories.
Inflation is already running at a decade high in the UK, scaling to 5.1 per cent in November.
The Bank of England expects the cost of living to jump to six per cent this April, triple its target, driven higher by the energy regulator, Ofgem, hiking the price cap to account for soaring wholesale gas prices.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The output price index edged up to a new record-high of 74.3 in December, from 74.0 in November, as manufacturers offloaded the burden of soaring energy prices. As a result, core goods CPI inflation looks set to rise further in the first half of 2022.”
Analysts warned manufacturers will need to step up investment to withstand strong inflationary pressures.
Simon Jonsson, head of industrial products at KPMG UK, said: “Manufacturers need to focus on how they can absorb, or pass on, these inflationary pressures.”
“In 2022, productivity improvements will be key. Inflationary pressures may be the catalyst for accelerating technology investments, both on the factory floor and in the back office,” he added.
Despite the substantial inflation headwinds swirling over the British manufacturers, the sector is proving resilient.
“UK manufacturing production rose at the quickest pace in four months in December, supported by increased intakes of new work, efforts to reduce backlogs of work and higher employment,” said Rob Dobson, director at IHS Markit.
The overall PMI hit 57.9 in December, down from 58.1 in November.
A reading above 50 indicates a majority of manufacturers reported growth.