Sunak’s ‘missed opportunity’ as widespread business price hikes fuel cost of living crisis

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Sunak’s ‘missed opportunity’ as widespread business price hikes fuel cost of living crisis

Inflation is predicted to become further entrenched as businesses begin passing on soaring operating costs to consumers in the form of widespread p

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Inflation is predicted to become further entrenched as businesses begin passing on soaring operating costs to consumers in the form of widespread price hikes in the coming months. Amid a background of already rampant inflation, April will see a number of changes clobber businesses and consumers with today seeing a rise in VAT and energy bills. On April 6, there will be a return of full VAT for the hospitality industry. Inflationary pressures are now reaching “uncharted territory” with record numbers of companies planning to raise prices, according to the British Chambers of Commerce (BCC). In survey data of over 5,600 firms, 62 percent were expecting to raise prices in the next three months.

This figure rose to three quarters for manufacturers and retailers, supporting findings from the British Retail Consortium this week that shop prices were rising at the fastest in over a decade.

According to the BCC, inflationary pressure on firms is now at its highest level in the 33-year history of the survey.

Pressure is also now mounting on Chancellor Rishi Sunak after March’s Spring Statement failed to address the concerns of many.

Shevaun Haviland, director general of the BCC, said: “The Spring Statement was a missed opportunity to ensure business have greater resilience to weather the uncertain and volatile times ahead.

“The Government must provide urgent financial support, through the expansion of the energy bills rebate scheme, to include small firms and energy intensive businesses, and he must introduce an SME energy price cap to protect smaller firms from some of the price increases.

“We also urge the Treasury to rethink and postpone the damaging National Insurance increase.

“A failure to act now will leave businesses with no option but to continue to raise prices – leading to more difficult months to come for both firms and households.”

Out of firms surveyed by the BCC energy, costs emerged as a running theme, along with increased raw materials costs.

Rising interest rates have also sparked concern for businesses with nearly a third now citing this as a potential issue.

While raising interest rates has been aimed at controlling inflation in the long run, there is a significant lag time and with many of the current price pressures driven by global factors, in the short term it has left businesses with higher borrowing costs on top of other cost increases.

With gas and oil prices hitting record highs in recent months April’s planned tax increases have come at a difficult time for many.

One manufacturer in the south of England told Express.co.uk they were “disappointed” to see the rise in National Insurance go ahead having already seen shipping and rental space costs soar.

A small services firm in Kent said they were “not at all happy with proposed plans for rises in corporation tax and National Insurance Contributions on the back of severe potential problems caused by inflation and global transport costs which have risen by up to 10-fold since early 2020”.

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Ms Haviland warned: “We need to be absolutely clear: this cost of doing business crisis is squeezing firms’ finances, driving further increases in prices and directly fuelling the cost-of-living crisis.”

The squeeze on businesses and consumers is also bad news for the UK economy more generally with evidence of higher inflation to come resulting in a slowdown in growth.

Suren Thiru, Head of Economics at the BBC, predicted: “The first quarter may be the high point for the UK economy with activity likely to stall in subsequent quarters as surging inflation, rising energy bills and higher taxes increasingly drags on activity.

“Russia’s invasion of Ukraine has raised the risk of a renewed economic downturn by aggravating the financial squeeze on businesses and households and disrupting the supply of commodities to key sectors of the UK economy.”



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