Lloyds Bank has issued a warning to consumers that business have “no choice” but to raise prices.
Despite growth in UK sectors remaining resilient throughout April, cost pressures continue to spread across the economy, according to the latest Lloyds Bank UK Sector Tracker.
In April, eight of the 14 UK sectors monitored by the Tracker saw output growth. This is one fewer than in March which was nine, but still more than the monthly average in 2023, which was seven.
Financial services such as banks, insurers, and investment services firms had the fastest output expansion, followed by software services, and commercial and professional services.
In each of these sectors, output growth was supported by stronger customer demand which was shown by all the new orders.
Based on past Tracker trends, April’s results suggest that UK GDP could hold or grow in Q2, Lloyds stated.
This was the first time every part of the UK economy has seen costs increase since December 2022.
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These results came despite all 14 monitored sectors seeing their costs rise in April.
This was the first time every part of the UK economy has seen costs increase since December 2022.
Higher staff costs were part of the reason for cost pressures in April by manufacturers.
The tourism and recreation sector – which includes pubs, bars and restaurants – experienced the sharpest rate of input cost inflation..
Throughout the widespread cost increases, 13 out of the 14 sectors monitored also raised their own prices.
Food and drink manufacturing was the only sector to reduce prices in April, although it was at a slower pace than the month before.
As the cost of living crisis continues, and inflation remains above its two per cent target, consumers have seen prices rise across their day-to-day spending.
Nikesh Sawjani, Senior UK Economist, Lloyds Bank, said: “As well as highlighting resilience, this month’s data suggests that the economy entered Q2 on a solid footing.
“Past UKST data shows that since the pandemic, when more than half of sectors have begun the quarter in growth mode – as it has here – GDP has held or grown.
“That being said, the cost and price trends we’ve uncovered here will be something closely watched by the Bank of England as it considers its next steps with interest rates. Sustained cost pressure could mean more businesses have no choice but to raise prices, which could have a bearing on the overall inflation outlook.”
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“That being said, the cost and price trends we’ve uncovered here will be something closely watched by the Bank of England as it considers its next steps with interest rates. Sustained cost pressure could mean more businesses have no choice but to raise prices, which could have a bearing on the overall inflation outlook.”
Scott Barton, Managing Director, Lloyds Bank Corporate and Institutional Banking, said: “It’s a testament to firms’ strength and flexibility that so many sectors are still achieving growth in what remain challenging conditions, particularly when it comes to costs.
“As we look to the months ahead, management teams will need to keep a laser focus on factors like supply chain performance, inventory, pricing strategy and working capital to ensure that they’re in the best position to weather headwinds, and capitalise on new opportunities.”