UK factory cost pressures 'worst in 30 years'

Manufacturers are experiencing their worst price pressure for nearly 30 years, a survey said today.

The latest CBI Industrial Trends survey showed that average unit costs rose for 65% of firms in the last three months, while they fell for just 7%.

The resulting balance of 58% is the highest reading since October 1980.

It comes in the wake of soaring oil prices, which reached a record US$147 a barrel earlier this month. They have since fallen back around 10%.

More manufacturers are also expecting to put prices up than at any time since the lead-up to the last recession more than 18 years ago.

A balance of plus 34% of firms expect prices to rise over the next three months, the highest level since January 1990.

The CBI's chief economic advisor Ian McCafferty said: "Cost pressures on manufacturers have been noticeable for over four years but in the last three months they have been their most intense for nearly three decades.

"So it comes as little surprise that manufacturers are passing some of these higher costs onto customers although this is unlikely to rescue profits from a margin squeeze.

"The record oil price peaks in the last three months have pushed down further on business confidence and lowered firms' expectations for demand in the coming quarter."

The business mood about the overall situation darkened considerably for the fourth quarter in a row, the survey revealed, with a balance of 40% reporting less optimism compared to the previous three months.

This is the worst reading since the aftermath of the 9/11 terror attacks in October 2001.