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The Cost Of Commerce Crisis Ratchets Up

By Anna Peel. Originally published at ValueWalk.

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ONS data: The cost of commerce crisis ratchets up, as energy prices stay elevated and businesses feel the pain

Main findings of the ONS survey: Business insights and impact on the UK economy: 24 March 2022 – Office for National Statistics (ons.gov.uk)

  • In early March 2022, a quarter (25%) of businesses not permanently stopped trading reported that their production and/or suppliers had been affected by recent increases in energy prices.

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  • The accommodation and food service activities industry reported the highest percentage of businesses affected by recent increases in energy prices, at 53%.
  • More than half (53%) of businesses not permanently stopped trading reported that they had been affected by general price increases in some way.
  • Of businesses currently trading, 16% reported an increase in demand for the goods or services they sold over the last month, up from 14% reported in February 2022.

The Cost Of Commerce Crisis

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:

“The cost of commerce crisis is ratcheting up, with little relief in sight as energy prices stay elevated and more businesses feel the pain. The problem of overheating overheads is now affecting more than half of all businesses according to the latest data from the ONS. Soaring gas and fuel prices are the major bugbear, with a quarter of firms reporting that their operations are being hit by higher energy prices. For companies with more than 10 employees, more than a third of firms are being affected by higher energy costs either directly with an impact on production, or via their suppliers.

Price pressures through the food and drinks supply chain appear to be particularly severe, and are the main drivers for more than half of companies in the accommodation and food services sector reporting a hit to operations due to higher energy prices. Companies are attempting valiantly to try and avoid passing these rising costs onto customers but it’s clearly very hard going. More than a third (35%) are managing to absorb the higher charges, with another 9% swapping suppliers to try and get better deals. But after fighting a losing battle against the rising tide of prices, around a quarter of businesses are already passing on costs to customers.

Demand for now though is still staying resilient, with consumers and business customers accepting higher costs for now, even as outgoings increase across the board. The worry is that once lockdown savings have been eaten into, government loans have been used up and higher bills hit next month, demand could start to dwindle as soaring prices bite more aggressively, particularly with wholesale energy prices staying so stubbornly elevated.”


About Hargreaves Lansdown

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