UK factories are bracing to hike prices to offset a margin assault caused by supply chain breakdowns, according to new figures released today.
Over three thirds of British manufacturers are intending to raise prices, the highest proportion since the Confederation of British Industry (CBI), who produce the figures, started tracking the data in 1977.
Global supply chains are buckling under the weight of economies around the world emerging from Covid-19 restrictions.
Orders for goods and raw materials has remained red-hot, putting producers under severe pressure to ramp up supply to meet demand.
Shipping firms are also struggling to transport goods amid historically high demand, creating shortages of inputs, which is driving up prices rapidly.
Stock levels contracted 16 per cent in November, the sharpest drop on record, according to the CBI.
Anna Leach, deputy chief economist at the CBI, said: “Alongside record order books, stock adequacy was the weakest on record in November and manufacturers are increasingly having to pass on significant cost increases to customers.”
Severely low stock levels come amid the steepest rise in order growth, suggesting manufacturers will struggle to catch up with demand unless they hike prices.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Demand for goods still is increasing rapidly, leaving manufacturers struggling to keep up.”
The fresh figures will make for sobering reading for the Bank of England.
The Old Lady has pinpointed a de-anchoring of medium term inflation expectations as the biggest threat to inflation becoming more entrenched in the UK economy.
However, prices are already rising at the fastest pace in nearly a decade, climbing 4.2 per cent over the last year, according to the Office for National Statistics.
The CBI figures reinforce separate data from IHS Markit released this week revealing cost bases for the entire UK private sector this month jumped at the highest print since January 1998.
UK businesses are also bracing to swallow a national insurance and corporation tax hike.