UK firms planning further price hikes as inflation bites

·2-min read
UK firms  Sunlight shines between two buildings as people walk through the financial district of London, Britain. Aug 24, 2018. REUTERS/Simon Dawson
Inflation: UK firms are passing higher input costs to their customers. Photo: Simon Dawson/Reuters

UK firms are preparing to push through further price rises in the second half of 2022 as inflation continues to build.

Some 37% of services firms surveyed by S&P said they raised prices in June, while only 2% cut them. Many said they were aiming for further price rises this year.

Two-thirds of firms reported a rise in their average cost burdens in June, such as energy, fuel and staff wages.

Read more: Inflation: More than six in 10 UK businesses set to raise prices

The S&P Global services purchasing managers' index came in at 54.3, better than the 53.4 expected which would have represented a flat result compared to May. Any score above 50 shows growth in the sector.

Tim Moore, economics director at S&P Global, said: "The service sector remained in expansion mode during June, but persistently high inflation has started to dent discretionary spending and negatively influenced demand projections across the board.

"New order growth was the weakest since the national lockdown in early 2021, with survey respondents reporting business and consumer hesitancy in response to the uncertain economic outlook."

Inflation in the UK is at record high levels
Inflation in the UK is at record high levels

Firms reported that activity was buoyed by improved consumer spending on travel, leisure and events at the start of summer.

Read more: UK economy dragged down by rail chaos

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), said: “The relative calm demonstrated by the slight uplift in the headline figure belies the underlying picture of businesses weighed down by rising costs, the struggle to build operating capacity and a shortage of raw materials caused by war and continuing supply chain disruption.”

Respondents in the PMI survey were their gloomiest since May 2020 as worries mounted about a recession, persistently high inflation and the impact of rising interest rates on demand.

Watch: How does inflation affect interest rates?