UK factories hike prices at record pace as inflation bites

·Finance Reporter, Yahoo Finance UK
·3-min read
UK factories performed better than expected in April, but concern is growing. Photo: Molly Darlington/Reuters
UK factories performed better than expected in April, but concern is growing. Photo: Molly Darlington/Reuters

UK manufacturers lifted their prices at the fastest rate on record last month as inflation raised costs, a new survey showed.

Selling prices rose at a record pace in April, with 61% of companies raising prices and fewer than 1% cutting them, S&P Global said.

Around 85% of companies registered an increase in purchase prices, while there were no reports of a decrease. The rate of inflation at consumer goods producers hit a series-record high, it noted.

Read more: UK private firms face supply chain crunch despite steady growth

Rob Dobson, director at S&P Global, said: “The inflationary situation is getting increasingly fraught. Input costs rose to the second-greatest extent in the 30-year survey history, leading to a record increase in factory gate selling prices.”

The S&P Global/CIPS manufacturing Purchasing Managers' Index rose to 55.8 in April from March's 13-month low of 55.2 — a slightly bigger rise than an earlier 'flash' estimate of an increase to 55.3.

Factory activity edged up in April after slowing to its weakest in just over a year in March following Russia's invasion of Ukraine but manufacturers were wary about the outlook.

S&P said manufacturing production increased across the consumer, intermediate and investment goods industries, while the expansion at consumer goods producers was only marginal.

New order growth slipped to its weakest in the current 15-month upturn, stymied by lower intakes of new export business and the impact on demand from rising selling prices, according to S&P.

Dobson said: “Manufacturers and their clients are struggling as lockdowns in China and the Ukraine war exacerbate stretched global supply chains, the inflationary picture worsens and geopolitical tensions rise.

"Specific to the UK, Brexit represents an additional headwind, notably via lost EU customers, increased paperwork, customs checks and border delays. Business optimism has fallen to a 16-month low as companies become more cautious about the future outlook.”

New business growth near-stalled as a slowdown in the domestic market was accompanied by a further deterioration in export orders.

Read more: Over half of UK firms to raise prices as inflation bites

Lacklustre demand from the EU was linked to longer delivery times, customs checks and higher shipping costs post-Brexit.

Simon Jonsson, head of industrial products at KPMG UK, said: “The sentiment among manufacturers remains positive, despite the challenges that they face becoming ever more complex as supply chains are disrupted and the spectre of inflation is foremost in everybody’s minds — businesses and consumers alike.

“These figures demonstrate strong resilience and an underlying drive to solve problems. The challenge for manufacturers is to ensure continuity of supply in these very challenging times. The opportunity continues to be how they innovate their industry 4.0 vision, making big data work hard on the factory floor.”

Watch: How does inflation affect interest rates?

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