UK companies are under pressure to raise prices this month as the costs of production see their fastest increase since 1998.

Raw materials, fuel and wage demands are all contributing to the steep increase in costs that is burdening the price consumers pay for goods and services.

A monthly survey, conducted by the IHS Markit, found the manufacturers reacted to the higher input costs by accelerating the rate they increase their charges. According to the survey, it is the highest increase rate in 20 years.

Businesses that offer services have reported they are unable to pass on the extra costs after a challenging response from their customers.

The price hike comes in time for the interest rates meeting in December, where analysts are saying that the cost pressures are likely to give momentum to a rise in interest rates.

Officials at the Bank of England have suggested that a rate rise is imminent to calm the rising levels of inflation.

However, with the survey showing a high demand for products and services provides room for an increase in employment. Chris Williamson, IHS Markit’s chief business economist Chris Williamson, adds that: “A combination of sustained buoyant business growth, further job market gains and record inflationary pressures gives a green light for interest rates to rise in December”. But Samuel Tombs, chief UK economist at Pantheon Macroeconomics argues that the strong growth in figures will “reassure wavering MPC members that the economy can withstand a modest increase in the interest rates at its next meeting on 16 December”.

Investors at the central bank are under speculation that the base rate of interest from the emergency pandemic level of 0.1% will increase to the normal 0.25% and a further rise of 0.5% in February.

The record rise of costs suggests that inflation could be more firmly established within the UK economy than originally thought despite official figures already showing a decade high of 4.2% in October.

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