UK firms brace for May price rises amid freight pressure

More than 40% of UK retailers and transport and storage firms plan to raise prices in May, according to Office for National Statistics survey data highlighted by Parcelhero. The figures mark a sharp increase from April.

The latest ONS Business Insights survey found that 41.1% of transport and storage companies expect to increase prices this month, along with 40.5% of retailers and 35.2% of manufacturers. The data points to broad pricing pressure across sectors closely tied to consumer demand and the movement of goods.

In April, 18.6% of transport and storage companies, 25% of retailers and 21.5% of manufacturers planned price increases. That means the share of transport and storage firms planning rises has climbed by 22.5 percentage points month on month, compared with 15.5 percentage points for retailers and 13.7 percentage points for manufacturers.

The comparison with March is also stark. That month, 10.5% of transport and storage firms increased prices, along with 24.6% of retailers and 13.5% of manufacturers, suggesting pressure has intensified over a short period.

Rising costs

The survey also showed many businesses reporting higher input costs. Comparing March with February, 50.6% of transport and storage firms said the price of goods and services they bought had risen, as did 50.9% of retailers and 48.5% of manufacturers.

Many businesses also reported weaker trading. In March, 26% of transport and storage businesses said turnover had fallen, compared with 27.2% of retailers and 25% of manufacturers.

Parcelhero linked rising costs and pricing plans to disruption associated with conflict in the Middle East. Among companies that experienced global supply chain disruption in March, 49.9% of retailers and 48.5% of manufacturers cited conflict in the Middle East as a factor. Across all sectors, 46% pointed to conflict in the Middle East as a reason for supply chain disruption in March, 34 percentage points higher than in February, according to the ONS.

The ONS data also indicated wider strain across the economy. Economic uncertainty was cited as affecting business by 27.6% of transport and storage companies, 43.9% of retailers and 37.4% of manufacturers. Across all sectors, this was the highest proportion reported since the question was introduced in April 2022.

Energy and freight

Energy costs featured prominently among the reasons businesses are considering price increases this month. They were cited by 34.1% of transport and storage companies, 42.9% of retailers and 45.2% of manufacturers.

Transport and haulage costs were also a major factor. The figures showed 41.6% of transport and storage companies said these costs were causing them to consider raising prices, while 36.4% of retailers and 40.6% of manufacturers said the same.

The transport and storage sector is central to domestic distribution and international trade flows. Any increase in freight, shipping or aviation costs can quickly move through supply chains and into shop prices, adding to pressure on businesses already facing subdued demand.

David Jinks, head of consumer research at Parcelhero, said the latest data pointed to mounting pressure on both companies and households.

He said: “The results of the latest ONS Business Insights survey spell bad news for both British industry and consumers. 41.1% of transport & storage sector companies say they plan to increase their prices this month, together with 40.5% of retailers and 35.2% of manufacturers.

“To put these price increases into perspective, only 18.6% of transport & storage companies planned price increases for April, together with 25% of retailers and 21.5% of manufacturers. That’s a 22.5 percentage point increase in the number of transport & storage firms planning increases over last month, a 15.5 percentage point increase among retailers and a 13.7 percentage point increase among manufacturers.

“The situation is even gloomier when compared with March, when the impact of the conflict was only just beginning to bite. In March, only 10.5% of transport & storage firms increased their prices, together with 24.6% of retailers and 13.5% of manufacturers.

“The planned price rises for this month are not surprising when we look at the increase in the cost of services and goods that companies are now facing. Comparing March with February, 50.6% of transport & storage firms reported an increase in the price of goods and services they bought in March, as did 50.9% of retailers and 48.5% of manufacturers.

“The bad news didn’t stop there. As the impact of the conflict hit, 26% of transport & storage businesses reported that turnover decreased in March, together with 27.2% of retailers and 25% of manufacturers.

“There is no mystery over the source of escalating prices and falling demand. Of those companies that experienced global supply chain disruption in March, 49.9% of retailers and 48.5% of manufacturers cited conflict in the Middle East. Across all business sectors, 46% cited conflict in the Middle East as a reason for experiencing global supply chain disruption in March – a 34 percentage point rise from February, according to the ONS.

“Businesses across all sectors face ongoing challenges created by the conflict. 27.6% of transport & storage companies, 43.9% of retailers and 37.4% of manufacturers said economic uncertainty was impacting their business. Across all business sectors, that’s the highest proportion reported since the question was introduced in April 2022, according to the ONS.

“Looking specifically at the factors causing businesses to consider raising their prices this month, 34.1% of transport & storage companies named energy costs, as did 42.9% of retailers and 45.2% of manufacturers.

“One final cost increase facing British businesses is in transport, because of disruption to the Strait of Hormuz and to international shipping and aviation across the Middle East. 41.6% of transport & storage companies said this was an issue that had caused them to consider raising prices this month. 36.4% of retailers and 40.6% of manufacturers also cited transportation or haulage costs as factors causing them to consider increasing prices during May.

“Unfortunately, the economic impact of the conflict does not look likely to lessen any time soon. The fragile ceasefire between the US and Iran is currently under increased threat over the Strait of Hormuz blockade, while international supply chains will face increased costs and disruption for months, even if the truce holds.”