Sunak urged to help firms facing ‘eye watering’ cost increases

Rishi Sunak is being urged to help businesses struggling with “eye watering” cost increases – which they say¬†are now being passed on to customers at record levels.

A survey by manufacturing organisation Make UK found that the balance of firms putting up their charges climbed to an all-time high of 58%.

The figure was up from 52% at the end of last year and just 5% at the end of 2019 before the onset of the pandemic and Britain’s departure from the European Union.

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Why commodities surge is driving up inflation pressures

Soaring raw material and energy costs were the biggest pressures facing firms – becoming a “matter of survival for many” – according to the latest poll.

It was conducted before Russia’s invasion of Ukraine, since when global prices for commodities from oil and gas to nickel, copper and wheat have surged further, adding to inflation worries.

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Make UK is calling for the chancellor to provide help when he delivers next week’s spring statement by delaying the planned hike in National Insurance rates, reinstating business rates relief for small firms and making permanent the “super deduction” tax incentive for investments.

Stephen Phipson, Make UK’s chief executive, said: “Companies are now facing eye watering increases in costs which are becoming a matter of survival for many.

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“The most immediate priority for the chancellor in the short-term must be to use his statement to do whatever it takes to support companies through this difficult period.

“The alternative is to leave many businesses facing a tipping point from which some will simply not recover.”

Image: The chancellor is due to deliver his spring statement next week

A separate poll, the IHS Markit Business Outlook, found a net balance of 62% of private sector firms planning to increase prices over the coming year, the highest level in its 12-year history.

The survey, conducted between 10 and 25 February, pointed to “severe cost pressures” including salary demands leading to record high staff cost projections.

Meanwhile, Martin McTague, new national chair of the Federation of Small Businesses (FSB), also called for help for business though pressed for a shift away from the “super deduction” which it argues mainly helps bigger businesses.

Instead he asked for the chancellor to “prioritise reduction of government-imposed overheads to free up funds for investment at the local level”.

Mr McTague said: “The chancellor has a choice: plough on with damaging tax hikes, or take steps to protect the most fragile and empower small firms to deliver his ‘culture of enterprise’ vision.”

The pleas from business come after Mr Sunak was last week warned by a leading think-tank that he must choose between borrowing billions more or see UK households face a cost of living squeeze that could be the worst since the 1970s.

Further price hikes from businesses could add to the upward pressure on consumer inflation – already at a three-decade high and predicted by the Bank of England to top 7% this spring, even before taking into account the impact of the Ukraine war.