West of England businesses are warning that the economic recovery from the pandemic is at risk due to growing inflationary pressures and worker shortages.
A third of the 250-plus firms taking part in the latest quarterly survey by regional business group Business West said they had to increase their prices due to rising input costs. 
Manufacturers were even harder hit, with 76% reporting they were under pressure to raise prices as a result of the soaring raw materials costs, and more than half expressed alarm at the increasing cost of imports.
With the Bank of England forecasting that inflation will end this year at 4% – up from its current 3% – and stay at that level for the first quarter of 2022, half the firms taking part in the survey expect to increase prices in the next three months. This rises to 62% of businesses in the manufacturing industries.
At the same time, labour shortages are having a widespread impact and are stifling business activity across the region.
Of the 60% of firms that had tried to recruit in the past three months, just under three-quarters said they had experienced difficulties finding the right candidates – the highest rate for four years.
While shortages in retail, leisure and hospitality are well-known, a lack of staff is also hitting the broader services sector hard, where 77% of businesses report recruitment difficulties – some eight percentage points higher than in the manufacturing sector.
Business West, which runs Bath Chamber of Commerce, said these figures represented a quarter-on-quarter rise of 11 and 16 points respectively, suggesting the problem was getting worse.
The most difficult roles to fill for firms taking part in the survey – the largest of its kind in the region – were skilled manual or technical (50%) and semi or unskilled roles (46%). 
One Bristol business facing this challenge is marketing agency Proctor & Stevenson.
Managing director Roger Proctor said: “Recruiting and retaining developers, digital project managers and digital marketers is a real problem.
“The partial cause of this problem is that European candidates with the relevant skills are no longer in the UK or do not want to be here anymore.”
The combination of higher prices and labour shortages has also brought the post-pandemic leap in business confidence to an abrupt halt, according to the survey.
Nearly half of all businesses felt that the prospects for the UK economy were positive in the previous survey. An even higher proportion (68%) said that they were feeling confident or very confident about their own business’ prospects over the next 12 months.
At the time Business West had hailed this ‘remarkable turnaround’ after four years of falling confidence – but it warned this could be jeopardised by looming skill shortages.
It appears to have been proved right as results from the latest survey show confidence levels weakening again with 37% of respondents now saying they feel confident or very confident of the prospects of the UK economy for the next 12 months and 60% feeling confident or very confident in their own business’ potential over the same period.
Business West managing director Phil Smith, pictured, said while the third quarter survey results maintained the positive outlook from quarter two, they were more moderate.
“Businesses in the South West are on the path to economic recovery. Nevertheless, this is not without a set of complex challenges that must be addressed, such as labour market misalignments, skills shortages, inflationary pressures and trade constraints,” he said.
