Price rises force 'radical' changes at UK factories

British manufacturers have been forced to make "radical" changes to how they work as soaring materials costs put them under more pressure.

A survey released today by manufacturers' organisation EEF and Royal Bank of Scotland found that almost half of the companies it quizzed had overhauled their products or processes in response to rising prices. Lee Hopley, the EEF chief economist, said the statistics were a "stark illustration of the impact of high material costs which manufacturers have been grappling with throughout the recovery."

Nearly two-third of companies have looked to different sourcing options to keep a lid on costs and 40 per cent have substituted some materials for cheaper alternatives. The pressure has also seen 40 per cent of firms look to renegotiate existing contracts with their customers.

Reflecting this, almost half of manufacturers cite managing input prices as a growth challenge, up from a third a year ago.

Peter Russell, head of manufacturing at RBS, said companies were mindful of further rises in input costs.

"Looking out to the next 12 months, the direction of commodity prices is very uncertain," he said. "But most manufacturers are building further price increases into their business plans," the RBS executive added.