Yahoo Finance UK firms most worried about rising energy prices and inflation
UK businesses are most concerned about rising energy and commodity prices, as well as input price inflation, a new study has shown.
According to the Office for National Statistics, in its economic activity and social change report, companies in the food and accommodation sector were particularly anxious about the jump in energy prices, compared to other industries.
Energy prices experienced the largest movement reported across all concerns, rising from 15% in late February to 20% in late March 2022.
The average price of gas increased by 17% in the week to 3 April, according to the National Grid. This was 444% higher compared to the same period a year ago.
It comes as UK inflation rose to 6.2% in the year to February, its highest level since March 1992, as UK households continue to face a sharp cost of living crisis. The biggest contribution came from soaring energy, fuel and food prices, while transport saw the highest rate for the second consecutive month.
Grocery prices also reached new highs in February, according to Kantar.
Other main concerns reported by businesses were supply chain disruption and taxation, the ONS said on Thursday.
Read more: UK facing worst cost of living crisis in 60 years
However, of currently trading businesses, 8% said that their turnover had increased compared with normal expectations. This was up from 6% in early February 2022, and was the highest percentage recorded since late November 2021.
The manufacturing industry reported the highest proportion of businesses reporting an increase, at 19%.
Some 32% said the coronavirus pandemic was the main reason for the change, down from 41% in early February 2022.
Nearly a third (31%) of businesses reported “other” factors as a reason for the change, with comments from businesses suggesting their business has seen growth, an increase in prices and an increase in demand for their goods and services, as having an impact on turnover.
The data also showed that an estimated 21% of the workforce were now using a hybrid model of working, the highest proportion since early October last year.
Those reported to be solely working from home fell to 10%, the lowest proportion reported since October 2021.
Read more: European stocks mixed as Russia sanctions and hawkish Fed weigh
Jack Sirett, head of dealing at Ebury, said the data demonstrated the problems businesses in the UK were facing in 2022, particularly those importing or exporting goods outside of the UK as global economic confidence ebbs and uncertainty rises, including on FX movements.
"Businesses are enduring a perfect storm as a slew of cost rises kick in with the cap on energy bills lifting in April alongside a hike to National Insurance contributions," he said. "Energy price rises will be particularly painful for energy-intensive industrial industries like manufacturing, while simply keeping the lights on will take a larger toll than usual on all businesses.
“The most recent price rises exacerbate existing issues like the increasing costs of raw goods and shipping, while ongoing supply chain issues and uncertainty over China’s strategy for dealing with COVID-19 continue to cause uncertainty.
“Many businesses say that they are absorbing these costs themselves, but consumers will inevitably be hit in the pocket as many companies pass on at least some of these price increases.
Separately, nearly half of UK businesses now expect Russia’s invasion of Ukraine to hit sales in the year ahead, according to a survey from the Bank of England (BoE).
Nearly half of respondents (48%) expected the conflict to negatively impact their year-ahead sales, with the average impact expected to be around -3%.
Around 11% of firms said the conflict was their largest current source of uncertainty, and nearly half cited it as a top-three threat.
Watch: How does inflation affect interest rates?
