Price increases planned by 50% of businesses!
The British Chambers of Commerce’s (BCC) Quarterly Economic Survey (QES) reported that 58% of businesses were planning price increases in the next three months. This is the highest percentage on record, and is in response to ongoing supply chain disruption, rising inflation, increasing interest rates and increasing energy costs.
The survey includes responses from a fairly large survey group of 5,500 businesses, but the data was collected beforethey felt any impact from the recent Omicron restrictions.
- 66% said rising inflation was their main concern.
- 27% were most worried about increasing interest rates.
- 23% reported increased pressure on cash flow.
When you look at the industry specific date, the figures expecting to implement price increases rises further:
- 77% of production and manufacturing firms.
- 74% of retailers and wholesalers.
- 72% of construction businesses.
- 69% of transport and distribution firms.
Suren Thiru, head of economics for BCC said: ‘Our latest survey suggests that UK’s economic recovery slowed in the final quarter of 2021 as mounting headwinds increasingly limited the key indicators of activity. The persistent weakness in cash flow is troubling because it leaves businesses more exposed to the economic impact of Omicron.
‘The record rise in price pressures suggests that a substantial inflationary surge is likely in the coming months. Rising raw material costs, higher energy prices and the reversal of the VAT reduction for hospitality are likely to push inflation above 6% by April.’
How should you respond?
Our advice would be to look carefully at your cashflow and your supply chain.
- Where are you likely to feel pressure from price increases around you?
- Will that be enough to push you to increasing your prices to maintain your profit margins?
- How’s your cash looking at the moment, and how much resistance might you get from an increase from existing customers?
- Are you going to be able to find enough new customers to replace any that you lose if you implement price increases, OR will increased profits enable you to work smarter for those that stay, and happily pay the increased price?
Is this an opportunity to increase prices that haven’t been reviewed for too long?
There is a case to suggest that if everyone is expecting general increases, it’s a good time to implement your own, as there may be more acceptance of them generally.
You might also take the chance to redress any inconsistencies in your existing pricing structure, perhaps between longer standing and more recent customers.
Pricing can be a very emotive subject, and one that is often influenced by our own feelings of self-worth. It’s far better though to get to a point where you’re ahead of the curve, rather than chasing profits or being pressured to make increases, or slashing your own profits.
Now’s definitely the time to give this some careful thought! If we can help in any way, please get in touch. You might also find it helpful to have a look at the Pricing section of our Rebound Resources for more on the subject.
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