UK manufacturers and service exporters likely to raise prices as Brexit bites

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BCC/DHL Trade Confidence Index
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The latest BCC/DHL Quarterly International Trade Outlook has found that the percentage of manufacturing and services exporters expecting to raise their prices has risen over the last quarter. Anna Tobin reports

The Quarterly International Trade Outlook for quarter four 2018 from the British Chambers of Commerce (BCC), in partnership with global logistics company DHL, has found that the weakening value of the pound and rising costs of raw materials and other overheads is pushing both manufacturing and service exporters to increase their prices.

Based on a survey of over 2,600 exporters, and export documentation data, the report found that nearly half (49%) of manufacturers and 39% of services companies plan to raise their prices, up from 41% and 34% respectively. Exchange rates were highlighted as a source of concern for 69% of manufacturers.

“These are uneasy times for many exporters concerned by persistent uncertainty around Brexit and future terms of trade with key partners. As we approach 29 March, so many questions remain unanswered and with the unwanted possibility of no deal still looming, businesses are preparing for the possibility of increased volatility,” said Hannah Essex, co-executive director of policy at the British Chambers of Commerce.

“At a time when all of the cogs of Government seem to be jammed by Brexit, issues crucial to the UK’s competitiveness and productivity have gone ignored. Business communities continue to shout about the scale of labour shortages, with four-in-five manufacturers reporting recruitment difficulties. Yet there has been little action relating to improvements in the UK’s training or skills system, nor has the Government’s immigration blueprint delivered on calls for a system to provide easy access to skills at all levels.

“The Government must urgently deliver clarity on the UK’s future after March 2019, and then immediately refocus on the fundamentals of the domestic environment. Removing barriers to growth at home is more important than ever at a time of such uncertainty and transition for our business communities.”

More encouragingly, the BCC/DHL Trade Confidence Index, which measures the volume of trade documents issued by Accredited Chamber of Commerce for goods shipments outside the EU, rose by 4.06% on the quarter, 1.03% higher than the same period last year. Shannon Diett, VP of marketing at DHL Express, added: “The increased trade confidence index, rising 4% on Q3 2018, indicates that despite the many difficulties, the resilience of British business remains, although businesses face pressure. This is in opposition to the Q3 results, which showed a decline on the previous quarter. There is also a very slight improvement year on year with an increase of 1% on Q4 2017.

“As the trade confidence index is a measure of trade outside of Europe, this indicates increased trade beyond the borders of the EU. We would encourage businesses to continue looking beyond Europe for opportunities and ask the Government to ensure trade deals are in place post-Brexit to enable this successful trade to smoothly continue.

“The uncertain conditions have only increased as we moved into the first quarter of 2019. The lack of clarity is causing businesses to move into no-deal Brexit scenario preparations, which adds considerable additional cost to business. The impact this is having on businesses trading internationally should not be underestimated, especially when considered alongside the rising pressure of poor sterling exchange rates driving up prices, as reported in this outlook. Almost half (49%) of exporting manufacturers and 39% of exporting services firms expect their prices to rise, which is an increase on the previous quarter.

“A considerable 84% of manufacturers are experiencing price pressure due to the weaker pound pushing up prices. Resilience drives these businesses forward despite the considerable pressures, and we stand alongside them in seeking the clarity and resolution we all need surrounding Brexit. An end to the uncertainty is urgently needed to allow businesses to move forward and continue to compete on the worldwide stage.”

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