Inflation and the Cost of Manufacturing Crisis

The manufacturing industry is unable to ignore the current cost of living crisis throughout the UK. The rise in material costs is being felt more than ever, with the impact of Brexit, the coronavirus pandemic, the war in Ukraine and now inflation.

Inflation is currently at a record high of 10.1% and the Bank of England expect the rate of inflation to continue to rise, sending nervous ripples through an industry which is already struggling with reduced levels of new work and demand.

Such rising costs are likely to be a prominent issue for many in the sector but particularly those in long term contracts and those where the price has been fixed from the onset, as many manufacturers will be unable to absorb the increase in costs alone and will have to explore passing those costs onto the consumer to stay afloat.

We are seeing the same story play out across the UK and many contracts under 'normal' circumstances that would have been performed, are becoming financially unviable. Rising costs and unexpected additional expenses are having a substantial impact on parties who have already agreed on a particular price to carry out the work.

While the entire manufacturing sector is being affected by the disruption caused by rising material costs and labour shortages, smaller businesses may be feeling the most vulnerable. 54% of manufacturers have said they have seen a major increase in material costs and 8% of those are concerned that the price increases have the ability to threaten the business.

It is therefore important to seek the relevant advice on existing and/or new contracts promptly to ensure that your contractual position is practicable in an attempt to head off any potential disputes and avoid incurring further costs.

Our Business Dispute Resolution specialists can help you have a greater understanding on your contractual position and what rights you might have to avoid or reduce the impact of rising costs or how to approach the topic of rising costs with your contracting partner.