Shoppers throughout the United Kingdom will be experiencing the sharpest price increases they’ve seen since February 2008. Companies from IT to financial firms and from restaurants to hotels are boosting their prices to help compensate for the Brexit vote’s weakening impact on the pound.
Sharpest Price Increase in a Decade
A recent survey conducted by the IHS Markit data firm and the Chartered Institute of Procurement and Supply (CIPS) showed that service industry companies such as restaurants and hotels, financial services, communications, transportation and IT are all increasing prices. They blame the Brexit vote for weakening the pound and forcing them to increase their prices faster than they have since February 2008 in order to make up for the dropping currency value.
Prior to 2008, the last time prices had risen this quickly was in 1996. The survey’s data doesn’t extend far enough into the past to measure the time before that. This most recent economy snapshot is quite concerning to consumers who are already facing struggles due to rising inflation and sluggish wage growth. It has arrived at a time when companies are building strategies to help provide their profits with protection by raising fuel, food and service costs.
U.K. Business Growth Slowing
Consumers will see these prices shooting upward at the same time that business activity overall is experiencing a reduction in its growth. November’s business activity growth rate showed a clear slowing from October as service firms saw a reduction in their new work. Staff hiring rates have fallen to the slowest growth rate since March. This was blamed on the increasing cost of imported goods and on economic uncertainty leading to withdrawn confidence levels.
The Markit/CIPS UK Services PMI dropped from having reached its highest point in six months in October, at 55.6 points, to a notably lower 53.8 points in November. Economists had been forecasting a result of 55 points on that index in November.
While the latest overall index reading indicated that the largest U.K. economic sector would see a healthy increase, the expansion rate remained a touch slower than the 2017 average. Equally, November’s reading represented the sixteenth consecutive month in which there was a score above 50 – the point at which economic growth is separated from contraction.