Record numbers of manufacturers are raising prices in the face of strong inflationary pressures which show little, if any, sign of abating according to a survey from Make UK and business advisory firm BDO.
According to the Make UK/BDO Q4 Manufacturing Outlook survey, UK prices rose from a balance of +50% in Q3 to +52% in Q4 with an expected increase to +58% in the next quarter, the highest balances in the survey’s history. The equivalent balance in Q4 2019 before the onset of the pandemic and leaving the EU was just +5%.
A similar picture exists for export prices where the balance rose from +43% to +51% and is expected to remain at that level in the next quarter. By contrast, the balance in Q4 2019 was -7% showing that just two years ago more manufacturers were cutting prices on exports than raising them.
According to Make UK, anecdotal evidence from companies suggests that price rises of around 10% are a regular occurrence and are passing by without a response from customers, suggesting such inflation is becoming built in.
James Brougham, Senior Economist at Make UK, said:“While manufacturers will be able to enjoy some festive cheer this year, their spirits will be tempered by the eye watering impact of escalating cost pressures which are leading an increasing number to pass these on to the consumer.
“Given the global nature of some of these pressures there is little sign that they will abate anytime soon. However, they will hope as we enter a fresh year that these will gradually unwind, with the compensation being that demand prospects among their major markets continue to look strong.”
Richard Austin, Head of Manufacturing at BDO, said:“Manufacturers faced a brutal 10% decline in output in 2020. This year, they rebounded proudly with some record-breaking figures. While challenges clearly still lie ahead, they can enter 2022 on significantly firmer footing than last year.”
According to the survey, Q4 figures show that the domestic market (with a balance of +35%) continues to outpace the export market (+27%).
Make UK has forecast growth for manufacturing in 2021 of +6.9%, down slightly from +7.1%, and growth in 2022 of +3.3%.