Nearly two thirds of companies (65 per cent) expect to increase their prices in the next three months.
And more than four in five (82 per cent) say inflation is a growing concern in the latest gloomy British Chambers of Commerce (BCC) survey of business sentiment.
The BCC warns that the red lights on its economic dashboard are starting to flash.
As to what factors are forcing businesses to hike prices – and in turn fuel inflation – 67 per cent cited utility bills, 66 per cent wage costs, 56 per cent costs and 53 per cent raw materials.
Meanwhile the government is urging businesses to do just the opposite. The government will launch a campaign next month encouraging firms to cut prices as an answer to the cost of living crisis. There will be no financial help for them to make up the difference – instead they will enjoy the halo effect of a logo.
Adding to the gloom, the number of businesses expecting to increase turnover in the next year is at its lowest level since the lockdown at the end of 2020, down from 63 per cent to 54 per cent.
Shevaun Haviland, director general of the BCC, said: “A cut in VAT on energy bills to 5 per cent, and other steps to relieve the tax burden on firms to encourage investment, are crucial. Better infrastructure, a plan to address labour shortages and a unified long-term economic strategy to give businesses more certainty are also needed.”
David Bharier, head of research at the BBC, added: “This quarter’s survey results clearly point to a weakening economic outlook amid unprecedented cost pressures and falling business confidence.
“Businesses face an unprecedented convergence of cost pressures, with the main drivers coming from raw materials, fuel, utilities, taxes, and labour. The continuing supply chain crisis, exacerbated by conflict in Ukraine and lockdowns in China, has further compounded this.”
The BCC surveyed over 5,700 firms for its latest quartery economic survey, which is the UK’s largest independent survey of business sentiment and an indicator of GDP growth.
No investment plans
One of the suvey’s findings was that three quarters of companies have no plans to increase investment in machinery or equipment.
The Institute of Directors has called for the “super-deduction” tax break, introduced in 2021, to support business investment, to become permanent.
Kitty Ussher, its chief economist, said: “When business confidence in the macroeconomy is low, as it is at the moment, the case for government incentives to raise investment becomes even stronger.”
Writing in The Sun on Sunday yesterday, prime minister Boris Johnson and chancellor Rishi Sunak said there would be business tax cuts and further reforms to encourage investment, innovation and training in the autumn Budget.