Inflation has barely stirred for most of the 14 years since the start of the global financial crisis. Yet the coronavirus pandemic has disrupted almost every aspect of the global economy, and businesses are having to face up to what to many feels like an unusual phenomenon: rapidly rising prices.

It has taken those who watch the economy by surprise. A year ago independent economists polled by the UK Treasury expected consumer price index inflation to reach only 1.9% by the fourth quarter of this year. On Wednesday, the Office for National Statistics reported CPI had risen 4.2% over the year to October – almost double the Bank of England’s 2% target and the highest in a decade.

The squeeze is being felt by businesses across the economy, who are caught between rising costs and potentially putting off customers. Here is how some of those businesses are faring.

The sheep and cattle farmer Jonathan Huntley wonders whether he will be able afford essential products next spring. Photograph: Karen Robinson/The Observer

Agriculture – Jonathan Huntley, sheep and cattle farmer

The lambs born in the spring on Jonathan Huntley’s farm in the Welsh valleys are selling well to other farmers, who will fatten them up in the run-up to the new year. But it is scant consolation at a time when he and other food producers are facing a wave of rising costs.

“Diesel and fertiliser are going to have a massive impact next year. Fertiliser is the biggest worry,” Huntley says, adding that the cost of animal feed has also been climbing.

“I have been quoted £400 per tonne for cattle feed; it usually would be £250 or £280 perhaps.”

At the family-run farm in the hills above Pontypridd, thoughts are already turning to whether they will be able afford essential products next spring.

Huntley usually buys fertiliser shortly after Christmas, ready for growing the spring grass that is vital for feeding his sheep. The price has almost doubled since his last purchase, and recently touched £700 a tonne, leaving Huntley and other farmers in a tough position.

“We can’t buy at that price, and we will have to a make decision whether to buy half as much as we have bought in the past and stretch it out,” he says. “It will have a knock-on effect and we are not 100% sure how it will pan out.”

Hospitality – Lee Worsley, publican

Pubs and restaurants have been among the businesses hit hardest during the coronavirus lockdowns. Now inflation is hindering their ability to catch up.

Lee Worsley, the co-owner of three pubs in Dorset
Lee Worsley, the co-owner of three pubs in Dorset, says: ‘It may be we have to reprint our menus every two or three weeks.’ Photograph: Lee Worsley

“We’re seeing almost overnight changes in some items – some in the 20% to 30% region,” says Lee Worsley, who runs three pubs, including the Kings Arms in Portesham, near Dorset’s famous Jurassic Coast.

Bakery products such as bread and burger buns, along with potatoes and British meat and fish are among the products that now cost more. Sometimes shortages are the problem: New Zealand sauvignon wine supplies were dented by a combination of a bad grape harvest and the weeks-long blockage of the Suez canal earlier in the summer.

Inflation pressures are adding to other difficulties such as the return of VAT to the 12.5% level, after a reduction to 5% allowed by the chancellor during the pandemic, and the return of business rates payments, Worsley says. Rising energy prices will hit soon when contracts come to an end, and one pub that relies on liquid petroleum gas deliveries has seen prices rise from 35p a litre to 44p a litre.

Worsley and his wife and co-owner, Joanna, check invoices daily to try to plan around their rising costs.

“It may be we have to reprint our menus every two or three weeks,” Worsley says, adding that prices could also go down if pressures ease.

Transport – Hassan Haji, private hire car driver

Hassan Haji, 40, is a private hire car driver from Camden, London, working primarily for Uber and Bolt.

“Everything’s going up but Uber has been bringing the fares we earn down. Now in London, they’ve just put fares up 10% but they actually lowered it during Covid, by bringing in fixed fares. It doesn’t matter if you’re stuck in traffic. The system generates its own fares – it shocks you, the mileage, the money you’ll get, maybe £15 for 12 miles across London. I was working during Covid, taking doctors and nurses, risking my life, there was no thanks from Uber – they put the commission up by 5% to 25%.

“Meanwhile, petrol, insurance, it’s all going up. I drive a hybrid – and even with that I’m struggling. The people on just petrol and diesel, I feel sorry for them. I saw fuel hit £1.60 a litre in one place – that’s almost 30p more than it was – £20 of fuel used to last me two days but I’m filling up much more than before. Driving a hybrid should be saving me a lot of money but at the moment I’m feeling the pinch.

“The price of the carwash has gone up as well … it used to be £10 and now it seems to be £15, £18 everyone. You wash it at least once a week, it’s got to be clean.”

Manufacturing – Brett Bateman of Somerset Toiletry Company

Price rises are “everywhere”, says Brett Bateman, the chief executive of the Somerset Toiletry Company. From raw materials to shipping to labour costs, manufacturers are feeling the squeeze. “There literally is nothing that hasn’t gone up,” he says.

The Somerset Toiletry Co Soaps
The Somerset Toiletry Company says prices for shipping from China have gone ‘absolutely crazy’. Photograph: The Somerset Toiletry Co.

The company manufactures soap in Clutton, a village between Bristol and Bath, as well as subcontracting to other factories around the UK. Price rises are evident across its supply chain, from the liquid that goes into hand soap and exotic ingredients that are used for fragrances to recycled plastic bottles from China, which have risen by 40%. Even prices for standard cardboard boxes for shipping abroad have gone up by 60%.

Prices for shipping from China, the world’s biggest factory economy, have gone “absolutely crazy”, he says. Shipping containers have risen as high as £22,000 and are unlikely to ever return to pre-Covid-19 levels between £6,000 and £7,000. That has added about £300,000 a year in costs – a big deal for a company with 42 employees and annual revenues of about £10m.

The remorseless logic of inflation means that companies can only endure cost rises for so long before they bump up their own prices. Bateman has so far resisted, meaning he has had to accept lower profit margins. However, he will be forced to raise his prices in January, meaning consumers will feel the pinch.

“There’s going to be an enormous knock-on effect into the next year,” Bateman says. “I don’t think we’ve seen the end of inflationary pressures on the high street.”

Retail – Adam Black of bed and mattress seller Button & Sprung

Button & Sprung put its prices up for the first time in four years in April and expects to put them up again in the spring as it struggles to deal with significant costs in raw materials and labour.

Sales have soared for the company, which sells online and has a showroom in Fulham, west London, with people spending more on their homes during lockdown and turning to online specialists while physical retailers were forced to close their doors.

However, its costs have also increased because the price of wood and metal, key materials in its bespoke beds, have risen more than 200% at some points in the past year and its suppliers have struggled to source wood at all at times because of high demand across the world.

Suppliers have also had to put up pay for upholsterers because of a shortage of labour partly as a result of Brexit, which has made it more difficult for skilled workers to come to the UK.

“In my time doing this, I have never not been able to get hold of wood before. There has been a dislocation of the supply chain,” says Black who co-founded Button & Sprung in 2014 after leaving Feather & Black, the furniture retailer he also founded just over a decade before. He said the company had absorbed significant cost rises over the summer and expected more in January. “We will have to pass some of that on,” he says.

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