Introduction

The CBI has recently conducted a survey of 224 UK manufacturers where 80% revealed that they are going to increase the prices of their products within the next three months. 

 

What factors are causing manufacturers to increase prices?

The main factor causing manufacturers to increase the prices of their products is due to inflationary pressures, as the consumer price inflation increased by 5.5% in January which is the highest since 1992. The Bank of England has recently predicted that inflation will peak at around the 7.25% in April when energy bills are set to increase by more than half. Furthermore, increases to the UK’s National Living Wage and the National Minimum Wage from April will increase the cost of producing manufactured goods. Therefore, the majority (80%) of UK manufacturers are planning to pass on this cost to consumers in order to maintain profit margins.

Some economists are calling for the Chancellor to use his Spring Budget in March as an opportunity to commit to increasing investment incentives to help manufacturers cope with inflationary pressures.

 

Manufacturing orders remain strong

Orders for manufacturers continued to be strong in February as demand for UK manufactured goods remained healthy globally. Global demand for manufactured goods increased by 20% during the pandemic compared to pre-pandemic levels. This increase in demand has had an effect on the price of raw materials increasing in international markets. CBI’s survey showed that the net balance of factories reporting rising orders decreased in February compared to January at +20% and +24% respectively. Although this was the lowest reading in the last four months the CBI has said that this is still well above the long-running average of the survey.

 

Conclusion

Despite orders remaining strong for UK manufacturers, inflationary pressures and increasing staff wages are having a profound effect on profitability. The majority of manufacturers (80%) are finding themselves increasing the cost of their goods to consumers in order to maintain profit margins. 

 

How can we help?

At Hawsons we have a dedicated team of manufacturing and engineering accountants at our offices in Sheffield, Doncaster, and Northampton.

Our specialist team offers a wide range of services which are tailored to meet your individual needs. Our understanding of the issues faced by the manufacturing and engineering businesses means that we can proactively seek out ways for you to maximise your profitability and minimise your tax liabilities.

 

Free initial meeting

Chris Hill

Senior Partner, Sheffield

0114 266 7141

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