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Business Conditions Improving But Inflation Concerns on the Rise

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Operating conditions for businesses across the UK improved notably in the second quarter of 2021 but concerns about inflation increased sharply during the same period.

That’s according to the latest data on business sentiment collected by the British Chambers of Commerce (BCC), whose surveys incorporated the views of more than 5,800 companies around the country.

A growing number of businesses told the BCC that their domestic sales and overall confidence changed for the better during the three months from April to the end of June.

Around 44 per cent of firms said they increased their domestic sales during Q2 2021 as compared with the previous three months, while 32 per cent of companies indicated that their cash flow situation improved in the same period.

However, BCC has noted that the positive trends in evidence reflect improvements from a low-level comparison point of Q1 this year, which was an exceptionally tough time for most businesses with the UK in the grip of a devastating second wave of coronavirus infections.

Nonetheless, with 65 per cent of businesses confident of increasing their turnover in the coming 12 months, there are clearly some positive signs in evidence within the economy.

Among the potential challenges emerging for businesses is that of rising inflation and pressures on prices, with the number of companies expecting to raise their prices in the coming months having increased sharply of late.

Those pressures are reported to be impacting manufacturers most acutely, with more companies in the sector expecting to increase their prices now than at any point since the BCC first started gathering comparable data in 1989.

“This latest set of results show that an economic recovery is beginning to take shape, but our members are also telling us that many businesses are far from being out of the woods yet,” said Shevaun Haviland, director general of the BCC.

“Whilst firms may be beginning to finally see cash coming in, most have a long way to go before they are trading at pre-pandemic levels.”

Ms Haviland also observed that while many businesses are once again able to trade as normal, many others are still faced with significant restrictions on what they can and cannot do.

Operators still inhibited by restrictions should be granted further financial support by the government to help them get through the rest of the pandemic, according to the BCC.

“These firms have fought incredibly hard to get to this point and they deserve the chance to contribute to the recovery,” Ms Haviland said in a statement.

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