Commenting on the latest Office for National Statistics figures showing that UK inflation reached 9.1% in the 12 months to May, up from 9% in April, East Midlands Chamber chief executive Scott Knowles said: “The further increase in consumer prices index inflation to 9.1% underscores the severe pressure that businesses and households are under, with the economy now on a knife edge.
“At the beginning of 2022, firms were already flagging huge spikes in raw material and shipping container costs as the world’s economy began reopening.
“Halfway through the year, we’re now seeing global factors continue to drive up commodity costs, with an increasing number of sectors being affected – leading to a very real cost of doing business crisis.
“The Chamber’s Quarterly Economic Survey for Q2 2022 shows that a net 62% of East Midlands businesses expect they will be forced to increase their prices over the next three years, citing escalating costs for energy, fuel, raw materials and labour as the key drivers. We are also in a period of tightening monetary policy, with interest rates continuing to rise and adding further costs to businesses.
“By leaving firms with little room at the margins, this impacts their ability to make the investments that will drive the productivity enhancements required to spur economic growth and ultimately bring down inflation.
“Indeed, our research shows that East Midlands companies’ investment intentions in plant and equipment fell by 6% between the first and second quarters of the year, while investment intentions in skills training dropped by 3% during the same period.
“Inflation is set to continue upwards, with a further rise in the energy price cap yet to come, leaving businesses with mounting economic uncertainty alongside significant labour shortages.
“One immediate measure to reduce the pressure on firms would be to cut VAT on business energy bills to 5%. The inflationary surge sits alongside a poor economic outlook and, unless the Government acts with urgency to encourage businesses to invest, the chances of a recession will only increase.”
