Inflation has already started to bite with prices up 2.3 per cent in the past year as, despite fierce competition pushing retailers to delay price hikes, the weak pound has pushed up the cost of imports, reports The Telegraph.
A survey conducted by the Institute of Chartered Accountants in England and Wales (ICAEW) showed half of UK businesses that have seen rising input costs plan to pass them on to customers or find cheaper suppliers.
Its poll of just under 800 businesses in commerce and industry found most are reluctant to curb investment, despite uncertainty surrounding the Brexit vote.
Cutting jobs has also been ruled out by most, the ICAEW said, leaving steeper price rises the only way to rebalance the books.
Since the EU referendum high-profile retailers including Primark have promised to absorb the higher import costs rather than passing them on to customers. Tesco and other food retailers have said that price hikes will be a last resort.
Sustain pressure from the weak pound is forcing many businesses to rethink, however.
The ICAEW survey showed 82pc now plan to offset higher prices by increasing charges to customers, while 48 per cent said they will hunt for cheaper suppliers and 31 per cent said they are considering changes to the way products were made. Just 14pc said they will tear up investment plans.
Stephen Ibbotson of the ICAEW said companies are facing pressure from the fall in the value of the pound as well as rising commodity prices.
“While many have sought to protect customers from those rises by absorbing the costs, that is no longer sustainable,” he said.
The weaker pound has also boosted a substantial share of UK businesses by making their exports more competitive as it stressed that higher input and factory gate prices were not solely driven by the sterling’s fall.
The ICAEW said 37 per cent of respondents said the fall in the value of the pound had “little or no impact on their business”, while a further 37 per cent said the drop had a negative impact because they faced increased costs.
A quarter of those polled said the impact has been positive, especially among exporters. Official figures last week revealed that exporters are generating higher profits as a result, with car manufacturers in the UK now bringing in more cash from foreign sales than they do from domestic purchases, as the overseas transactions now translate into more pounds.
Mr Ibbotson urged the Government to provide businesses with the stability they needed as the UK begins to negotiate its exit from the European Union.
“Government needs to spell out and put in detail how it can partner with business to make the long-term investments necessary to secure the UK’s economic future and make it the best place to do business,” he said.
However the British Retail Consortium has found food prices are already climbing, rising by 0.6 per cent between February and March.
The potential impact was brought home to shoppers when a pricing row between Tesco and its Marmite supplier Unilever led to the yeast-based spread being briefly removed from the supermarket’s shelves in October.
Prices are also rising for goods including furniture, books and stationery.
Even clothing, which has been subject to cutthroat discounting as retailers sought to battle online competition, could see price rises coming through.
High street stalwarts Next and Moss Bros have both indicated that prices are likely to rise by as much as 5 per cent this year.
