Inflation driving Thames Valley businesses into ‘uncharted territory’

The highest rates of inflation seen in a generation are having a huge impact on businesses across the Thames Valley, which are having to raise their prices in response, according to new research from Grant Thornton UK LLP.

In its latest Business Outlook Tracker* survey, Grant Thornton found that 50% of the Thames Valley’s mid-market firms have already raised their prices, with a further 42% expecting to need to do so in the future

Almost half (46%) of the businesses who have already, or have plans in place to, increase prices, expect the increase to remain in place for at least 12 months, while nearly one third (31%) anticipate that this will be permanent.

The research also found that amid rising costs, wage inflation and energy bills, confidence in the mid-market has dipped. Just 64% of respondents in the Thames Valley are optimistic about the outlook of the UK economy, a -12 percentage point (pp) decrease compared to February (76%).  

The latest Tracker also recorded a significant fall in respondents reporting revenue growth optimism – dropping down to 62% of business leaders indicating they were confident compared to February’s total of 72%.

These challenges have also led to changes in investment priorities, with investment expectations for the next six months dropping significantly across all areas monitored by the Tracker.

The most significant drop in the Thames Valley’s investment expectations (-36pp compared to the last Tracker) is seen in employee reward and benefits. This is followed by recruitment (-26pp), R&D (-26pp) and skills development (-22pp). 

Jim Rogers, practice leader for Grant Thornton in the Thames Valley, said: “With inflation running at 9% and predicted to rise even further, the Thames Valley’s mid-market is currently operating in uncharted territory. While the Chancellor’s response may slow the spiralling rate rises somewhat, most businesses are still facing a perfect storm of problems, which now also includes the prospect of a recession looming on the horizon.

“Thanks to this range of issues, most businesses are going to be facing a squeeze from one direction or another. The Thames Valley’s strong tech sector may not be as exposed as other sectors, such as hospitality and tourism, but the higher costs and increased energy prices combined with the possibility of a slowing economy is a real cause for concern. 

“Many are therefore seriously considering when they need to increase their own prices in order to maintain acceptable profitability and cashflow levels – if they haven’t done so already. Acting quickly and decisively to manage rising inflation rates could mean passing on increased prices to the consumer, but management teams also need to be looking at every aspect of their business to identify potential savings.”