UK manufacturing Copyright Matt Cardy, Getty Images

UK Manufacturers Plan Price Hikes as Weak Pound Boosts Costs

The pound has dropped against all major peers since the start of the year and measures of implied volatility have surged to a seven-year high ahead of the vote.

U.K. manufacturers, hit by the weaker pound pushing up costs, are planning to try to pass on price increases to customers in the coming months to cope with the squeeze.

While the 5% drop in trade-weighted sterling this year helps factories’ competitiveness, it’s also helped to ramp up input costs at the fastest pace in two years, the Confederation of British Industry said in a quarterly survey published in London Monday.

While firms say they have found it hard so far pass on the burden to clients, they expect an improvement over the coming quarter, with costs declining and domestic prices rising. The measure of domestic prices increased to the highest since April 2014, according to the report.

The CBI survey reflects the impact that the global financial turmoil at the start of the 2016 and Britain’s referendum on European Union membership has had on manufacturers. The pound has dropped against all major peers since the start of the year and measures of implied volatility have surged to a seven-year high ahead of the vote.

The CBI said investment intentions have “strongly” improved, with planned capital expenditure on buildings climbing to a near three-decade high. That’s in contrast to the assessment of the Bank of England and others, who’ve warned that the so-called Brexit vote is weighing on confidence and investment plans. Companies expect employment to remain stable in the three months through July.

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