Weak pound 'will increase price of products'

The falling pound has been a double-edged sword for many UK businesses


Fresh evidence that the weak pound will increase the price of products has emerged, amid warnings that domestic sales margins of firms are being squeezed.

A survey of 1,500 businesses by the British Chambers of Commerce (BCC) showed that almost half reported a negative impact on domestic sales caused by what is happening to sterling.

One in four firms said the effect was positive, while almost as many revealed a negative impact.

More than two thirds of those polled expect a fall in the value of sterling to increase their cost base this year, and just over half believe they will have to increase the price of their products and services.

Dr Adam Marshall, director general of the BCC, said: "The depreciation of sterling in recent months has been the main tangible impact that firms have had to grapple with since the EU referendum vote.

"Our research shows that the falling pound has been a double-edged sword for many UK businesses. Nearly as many exporters say the low pound is damaging them as benefiting them.

"For firms that import, it's now more expensive, and companies may find themselves locked into contracts with suppliers and unable to be responsive to currency fluctuations.

"Our survey shows that inflation is going to be an important concern for businesses over the coming year. While inflation rates aren't high by historical standards, they are still putting increasing pressure on companies.

"Rising costs are squeezing margins, and forcing many firms to increase the prices of their goods and services."

A separate report showed that confidence in manufacturing firms has reached a 20-month high.

Business adviser BDO LLP said that despite uncertainty over Brexit and Donald Trump's presidency, economic prospects in the UK were encouraging.

Spokesman Peter Hemington said: "The UK economy seems to be remarkably resilient. British businesses are surprisingly confident about the short term, encouraged by the opportunities our cheaper currency and a better-performing global economy have created.

"These have provided a much-needed short-term boost for our economy, particularly our manufacturers."