Manufacturers raise prices at fastest rate in 40-years

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The war in Ukraine has begun to affect prices for manufacturers, denting optimization

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ptimism among manufacturers is falling at its sharpest rate since April 2020 on the back of slowing output and spiraling costs, according to the Confederation of British Industry (CBI).

The CBI’s latest survey, which quizzed 250 manufacturers, found output in the quarter to April grew at a slower pace than in the quarter to March, up 19% compared to 27%. The pace of total new orders also slowed.

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Meanwhile, average costs in the last three months grew at their fastest rate since July 1975, while domestic prices increased more quickly than at any time since October 1979.

Cost increases were linked to the rising price of raw materials, energy costs, transport and labour.

Earlier this month, inflation soared to a new 30-year high of 7%, as the economic effects of the war in Ukraine begin to bite, pushing up the cost of oil and gas among other things. In the UK, factory gate prices are rising even faster than headline inflation, at 11.9%, and input costs are nearer 20% according to official figures.

The companies surveyed by the CBI said their confidence to invest in things such as plants and machinery, training and buildings had weakened compared to January as costs soar.

However, employment growth improved and is expected to pick up further in the next quarter.

CBI deputy chief economist Anna Leach said: “The war in Ukraine is exacerbating the Covid-related supply crunch, with cost increases and concerns over the availability of raw materials at their highest since the mid-1970s.

“It’s a little wonder that sentiment has deteriorated sharply over the past three months and manufacturers are now scaling back their investment plans.”

She called on the government to implement support measures, such as cashflow support and lower energy bills, to help maintain competitiveness in the UK.


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