Britain’s exit from the European Union and the pandemic are adding to inflationary pressures that are starting to slow the U.K. economic recovery, two business surveys show.
“We are seeing the first signs of supply chain struggles starting to hinder the upturn,” said Nick Goldin, managing director of South West Manufacturing Advisory Service, a group working for government and local authorities to spur business in the region.
Lloyds said higher wages and materials costs led to an unprecedented rise in input costs. That confirmed a government report on Wednesday that showed a 9.9% surge in raw materials costs in July and the biggest jump in a decade for the price of goods leaving factory gates.
Of the 14 industry sectors Lloyds and Markit track, 12 grew in July, the lowest number in four months. Food and drink makers said output declined at the sharpest pace in eight months, and health businesses recorded the first drop in six months.
Higher shipping costs resulting from friction at the border following Brexit and staff shortages added to costs, amplifying the shock from coronavirus lockdowns that reduced productive capacity.
Half of the firms are struggling to attract workers to fill jobs, the manufacturing advisory group said. Another report from the recruitment platform Indeed showed a majority of the unemployed are not looking for a job because they said they’re financially secure. Just one-in-10 of the workers on furlough are urgently seeking new positions ahead of the scheme’s end in September.
“Many businesses are facing growth constraints due to ongoing disruptions to supply chains and shortages of labor,” said Jeavon Lolay, head of Economics and Market Insight at Lloyds Bank Commercial Banking. “These pipeline issues represent early indicators of the potentially broader inflationary pressures to come.”