More and more businesses are facing increased pressure to raise prices as input costs increase the Northern Ireland Chamber of Commerce and Industry has claimed.
As UK inflation hit a five year high, the Chamber’s Quarterly Economic Survey, published in association with business advisers BDO, said manufacturers and services sector businesses were feeling the squeeze.
According to the Q3 2017 report, 49% of manufacturers – the highest across 12 UK regions – and 40% of services are expecting to raise prices in the next three months largely due to rising costs.
Overall, the results show that the Northern Ireland economy continued to grow during the quarter although there were some signs of growth softening despite a positive performance in export markets.
Almost all key balances remained positive during Q3 with more businesses in manufacturing and services reporting increases in indicators such as sales, exports and employment than those reporting a fall.
Northern Ireland had one of the most negative reactions across the UK regions to the outcome of the EU referendum vote in Q3 2016.
However, its regional position has recovered somewhat and in services 9 of the 14 key balances remain above the UK average in Q3.
Manufacturing’s regional position weakened however during Q3 with five of the 14 key balances above the UK average (9 in Q2).
“The uninspiring results we see in our third quarter findings reflect the fact that political uncertainty, the vagaries of the Brexit process and the resulting currency fall out are continuing to weigh on business growth prospects,” said Chamber CEO Ann McGregor.
“The slump in sterling is pushing up sourcing costs for importers. Businesses are coming under increasing pressure to pass these costs onto customers at a time when their spending power is already squeezed.”
Nevertheless, she acknowledged that sterling’s weakness also had benefits to be seen in the competitive boost it has given exporters, both in manufacturing and services.
“Businesses need support to boost their confidence at this critical time. Our politicians can offer them support but that will only come about with the restoration of the Executive. This must happen in the near future before more time is lost.”
BDO managing partner Brian Murphy said: “Currency is of course only one factor impacting upon performance, but the latest quarterly economic survey indicates firms are responding to concerns with revised and realistic expectations of sustained or improved turnover and more modest profit margins.
“On balance that is not entirely unexpected. The relatively low value of sterling has enabled Northern Ireland’s manufacturing and services sectors to sustain growth in exports and sales, albeit a little more slowly in the last quarter. While that gain is now being offset by rising raw material costs and other pressures, businesses are still showing higher levels of confidence than would normally be seen during this time of year.
“The next few months may see rising prices and a squeeze on some sectors, but despite the challenges we remain well placed to ride out the turbulence.”