Hampshire Chamber business survey – companies more worried about inflation than they were three months ago

Four out of five respondents to the latest quarterly survey of Hampshire Chamber members said inflation was more of a worry now than it was three months ago.

And more than half say they are coming under pressure to raise prices for customers in coming months.

The main reason, cited across both manufacturing and services firms, is rising labour costs such as salary settlements and contractor fees.

Other significant factors are the rising costs of gas, electricity, petrol, diesel and raw materials.

Reflecting labour market pressures, 85% of businesses that have tried to recruit staff in the past three months say they have experienced difficulties.

Competition has been most acutely felt in the search for skilled manual or technical staff in service industries such as retail, hospitality, professional services and the creative sector.

In a trend comparable to other recent surveys, just under two-thirds of respondents (64%) say they are operating below capacity.

But despite the myriad of challenges, including a mixed picture on sales and orders and pressure on cashflow, respondents have generally kept most investment plans on track in the past quarter.

And there is optimism about both turnover and profitability over the next year. Four out of ten respondents (42%) expect turnover to improve in the coming 12 months, compared to 37% who expect it to remain the same and 20% who believe it will worsen.

On profitability, 38% expect it to improve and 31% forecast it will worsen, with the rest anticipating no change.

Responding to the findings, Hampshire Chamber Chief Executive and Executive Chairman Ross McNally said: ‘Higher wage demands and rises in other input costs, for example in energy and raw materials, naturally impact the cost of doing business.

‘It is clear from the survey that we remain in a very challenging period characterised by high inflation and interest rates.

‘Yet our research also underlines the resilience and determination of members to go for growth and achieve the turnover and profitability they need to sustain their businesses and prosper.

‘To help achieve the business-led recovery we all want to see after several challenging years of successive economic shocks, we reiterate the need for government to match our members’ remarkable sense of optimism with a clear long-term plan for economic growth.

‘Concerns over high wage costs should give the government and Bank of England pause for thought on their next steps.

‘Policymakers should consider very carefully indeed the impact on business activity of any further interest rate rises.

‘The economy needs to rally soon to support growth and trading prospects.’