Published: 07:59, 08 August 2016
| Updated: 08:29, 08 August 2016
There were growing fears in Kent about the rising costs of imported goods even before the nation voted for Britain to leave the European Union.
Since the referendum on June 23, the value of the pound has fallen to record lows, giving a boost to exporters but hindering importers as the price of items from abroad increases.
It comes at a time when raw material costs have been edging up throughout 2016, mainly due to the falling value of the sterling amid Brexit concerns.
Since the last three months of 2015, a growing number of members of Kent Invicta Chamber have said raw material costs are putting pressure on what they charge for their goods and services.
More than 20% of respondents to the Quarterly Economic Survey said it was putting pressure on prices in the second quarter of 2016. Almost half said inflation was their greatest concern.
Yet there is evidence Kent businesses are resisting the urge to put up prices in the face of growing costs, despite the Consumer Price Index showing inflation grew to 0.5% in June.
The Quarterly Economy Survey showed fewer firms planned to increase prices, down eight points to 27%. There are also more firms planning to cut prices, up four points to 6%.
Professor Richard Scase, an economist at the University of Kent, controversially thinks the results mean the number of firms cutting prices will continue to grow over the next year, particularly amid the beginnings of a supermarket price war.
Shares in Tesco, Sainsbury’s and Morrisons fell this month amid concerns about Asda repositioning itself with a slash in prices.
The survey results were taken a month before the Consumer Price Index showed inflation rose 0.5% in the year to June, mainly due to the increasing price of fuel, exacerbated by the increasing price of air fares during Euro 2016.
Meanwhile, the Bank of England cut interest rates to an historic low of 0.25% last week.
Prof Scase said: “The Bank of England’s fear is deflation, so they will not change interest rates.
“The falling cost of everyday living – the price of things at the supermarket – will put real pressure on prices and they will likely fall between 1% to 3%.
“The only price increases will be on overseas travel and the cost of petrol. It is the middle-market businesses which will remain very competitive and be forced to keep prices down, but the high-value-added and luxury players will still be able to charge what they like.”
James Gransby, partner at accountancy MacIntyre Hudson, based in Maidstone, said: “I imagine the next results will show exports have increased – not because of Brexit but because of the falling value of sterling.
“Any products brought in from abroad will be more expensive, which means hopefully people will look to British suppliers. We might see businesses rushing to buy British.”
More from the Quarterly Economic Survey
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