arrow_back_ios Back View more articles
A calculator

Inflation fears grip half of UK businesses – British Chambers of Commerce report

Fears about inflation are hitting record levels among businesses in the UK, according to a major economic survey published today (Wednesday) by the British Chambers of Commerce.

“While businesses continue to recover from the deepest recession on record, persistent weakness in several indicators highlight concerns over the strength of the recovery,” said the report’s authors.

The Quarterly Economic Survey from the British Chambers of Commerce showed that some indicators, such as domestic sales and orders improved in Q3.

However, it also revealed stagnation in the proportion of firms reporting improved cashflow and increased investment.

And the survey of 5,700 revealed firms’ expectations of price increases and fears about inflation are hitting record levels.

Business activity

Forty-seven percent of respondents overall reported increased domestic sales in Q3 (compared to 44 percent in Q2), while 16 percent reported a decrease (20 percent in Q2).

Cash Flow

Thirty-three percent of businesses reported increased cash flow in Q3 (compared to 32 percent in Q2) – much lower than the percentage of firms who reported a rise in domestic sales (47 percent).

Meanwhile 1 in 5 firms (22 percent) reported a decrease in their cash flow, while 44 percent reported no change.

The reports authors said that given the dramatic worsening of cash flow at the onset of the pandemic in Q2 2020, the failure to see any significant increases in this metric is a cause for concern.

Micro (28 percent) and small (20 percent) businesses were also more likely than medium (17 percent) or large (12 percent) businesses to report a decrease in cash flow in the quarter.


Twenty-seven percent of firms overall reported an increase in investment in Q3 (unchanged from Q2), far lower than the percentage of firms who reported a rise in domestic sales (47 percent).

The failure to see any positive upward movement in investment, said the BCC, is another troubling warning sign for longer term recovery.

Meanwhile, 13 percent of firms reported a decrease in investment in Q3, and a further 59 percent said they had seen no change.

Inflationary Pressures

Forty-seven percent reported overall expect their prices to increase over the next three months (42 percent in Q2) with just two percent expecting prices to decrease (unchanged from Q2).

Within the survey, firms provided details of the wide range of inflationary pressures on their business, such as 150 percent increases to some steel products, and 600 percent increases in shipping containers.

Suren Thiru, head of economics at the British Chambers of Commerce, said: “Our latest data indicates a disappointingly modest uptick in economic activity in the third quarter as the boost from the end of restrictions was increasingly stymied by supply and staff shortages and rising cost pressures.

“The key services sector recorded the strongest improvements as consumer-focused firms, including hotels and hospitality, received the biggest boost from the easing of social distancing restrictions.

“Manufacturers saw more limited gains as increasingly severe supply chain disruption stifled their ability to fulfil orders and meet customer demand.

“The results point to an underwhelming three months for business investment as the damage done to firms’ cash flow by the pandemic and growing concerns over a more burdensome tax regime squeezed investment intentions.

“Acute supply shortages and rising raw material costs drove an historic surge in inflationary pressures in the third quarter.

“However, with little evidence in our figures that higher inflation is stoking a broad-based escalation in pay settlements, the MPC should have enough leeway to keep interest rates steady over the medium term.

“Though the UK economy remains on track for moderate growth in the third quarter, with staff and supply shortages increasingly having a suffocating effect on economic activity and price pressures intensifying, a spell of stagflation maybe inevitable.”

And the director general of the British Chambers of Commerce, Shevaun Haviland, said:

“The supply chain crisis, alongside wider labour shortages and spiralling price rises, is clearly starting to drag on our economic recovery from Covid-19.

“Businesses are being battered by a deluge of up-front cost pressures, including huge increases in the prices of key raw materials and shipping, as well as now facing a rise in National Insurance Contributions.

“At the same time, they are losing out on opportunities for growth due to the labour shortages, despite many already raising wages and offering training.

“The focus must now be on creating the best possible environment for businesses to grow and thrive.

“By supporting firms through the difficult months ahead they can begin to generate wealth, create jobs and support communities.

“That is by far the best way to sustainably deliver the tax revenue the government needs to support public services and the wider economy.

“That’s why I am calling on the government to place a moratorium on all policy measures that increase business costs for the remainder of this parliament and to finally deliver fundamental reform of our broken business rates system.

The Prime Minister must take action now, with plans not plaudits, or businesses across the country, and our wider economic recovery could falter under the weight of these pressures.”

Business leaders from the Thames Valley Chamber of Commerce region will be able to get the regional figures, with insight provided by experts from accountancy and business advisory firm BDO and the British Chambers of Commerce at a webinar next week.

Senior representatives from BDO, the British Chambers of Commerce, and a panel of business owners will discuss the implications for the region including an update on the current economic situation and how it may affect the businesses at an online event on Wednesday, October 13 from 10am to 11.30am.

Panellists include David Brookes, partner and head of BDO in the Thames Valley, and David Bharier, head of research at British Chambers of Commerce, with Charlie Walker, director at Walker Logistics.

Attendance is free. To book a place visit