Supply chain pressures to lead to Christmas price hikes, companies warn

Smaller businesses are preparing to hike prices over the Christmas period as they continue to feel the strain of rising costs and supply chain disruption, according to a new report.

Around four in five mid-sized firms said they are expecting supply-chain strains, rising costs and Covid-19 restrictions to hamper trading in the next month.

A further third said that they were planning to up their prices, according to a survey of 500 businesses from accountancy firm BDO.

Businesses have been battered by the combination of rising utility and fuel costs over the autumn and bosses now say they expect this to impact consumers in the period ahead.

Around 32% of mid-sized firms in the retail and wholesale sector said they will increase prices, while 32% of businesses overall said they plan to cut the number of products or services they offer as a direct result of inflation.

Manufacturing businesses are bearing the brunt of the pressures, with around 39% planning to decrease the number of products on offer and a similar number set to increase costs of their products and services.

Ed Dwan, partner at BDO, said: “Following a year of disruption, many businesses will have been hoping for a strong finish to 2021 and a fresh start for 2022.

“The harsh reality is that continued supply chain issues, rising energy prices and increasing costs means that many are taking further drastic measures to stay afloat.”

Bosses have warned that the return of Covid-19 restrictions could place further strain on the availability of goods and services.

Around 45% of firms said that shoring up their domestic and international supply chains was a priority for the next three months.

Businesses said that inflationary pressures were likely to restrict growth in the longer term with just over a quarter of firms saying inflation and higher interest rates were likely to have the biggest impact on their business in the next year.

In a separate report by small business network Simply Business, one in five small firms said they don’t expect to survive 2022 without a bumper Christmas this year and over a quarter said they were not confident about their business’s chances this December.