Bank of England snapshot shows uncertainty reigns for UK businesses
Bank of England snapshot shows uncertainty reigns for UK businesses as inflation and labour shortages bite
- Firms are becoming even less confident about the future – 63% of companies reported business uncertainty was ‘high’ or ‘very high’ in August
- Recruitment difficulties remain widespread – 86% of firms reported they were finding it harder to recruit new employees compared to normal
- Inflation is a continuing headache – in the 12 months to August unit costs (the price it costs to produce store and sell goods) increased by 9.8%
- Companies are still trying to absorb price increases – with annual private sector output price inflation 7.7% in the three months to August
The Bank of England has published a survey of chief financial officers showing attitudes towards inflation, recruitment and business uncertainty:
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown: ‘’Given the highly unpredictable landscape, with more scorching energy hikes on the horizon, it is little surprise that firms have become less confident about the future. This latest survey of chief financial officers shows that uncertainty reigns in businesses large and small. The level of overall business uncertainty edged up again in August with 63% of respondents reporting that uncertainty for their business was ‘high’ or ‘very high’ at the moment, 1 percentage point higher than in July. With a recession looming for the UK and expectations that millions of people will be pushed into absolute poverty, mainly due to frighteningly high heating bills, its little wonder businesses are nervous about the months ahead. Russia’s invasion of Ukraine sent gas and oil prices soaring and now more financial bosses are worried about impact of the conflict than they were last month.
The shortage of labour continues to be a major headache, with almost 9 out of 10 firms reporting that they are finding it more difficult to recruit new employees than they would normally. Almost two thirds of firms reckon it’s become a lot harder, which is only to be expected given that vacancies are still hovering close to record levels. The pool of talent from the EU has dried up and that’s clearly partly behind some of the current staff shortages. Concerns about the UK’s trading relationship with the EU loom large in the survey, with a growing number of respondents concerned about the repercussions of Brexit compared to July.
Prices are continuing to spiral upwards for businesses with unit costs – the sum it takes to produce store and sell goods – increasing by 9.8% in the 12 months to August. Companies are attempting valiantly to try and avoid passing rising costs onto customers, given that output inflation was limited to a still painful 7.7% in the three months to August. However other data has indicated that many firms are now fighting a losing battle against the rising tide of prices, and are passing on more of the hike to their customers. There is no easy solution to the problem of overheating overheads, with energy prices expected to stay elevated so the clamour for government help from industries across the board is likely to continue.’’