Brake company boss says global demand driving inflation

Thomas Krosnar Image copyright bbc
Image caption Mr Krosnar said the increased cost of materials would ultimately reduce demand

The head of a brake manufacturing firm has blamed increasing global demand for raw materials for driving inflation.

Thomas Krosnar, from EURAC in Poole, Dorset, said the cost of commodities like steel and resin had increased by 50% in 2011.

In November the rate of inflation measured by the Consumer Prices Index (CPI) was 4.8%, a drop of 0.2% compared to October.

But last year the average UK pay rose by just 0.5% to £21,326.

Across the BBC South region, the Office of National Statistics' 2011 Annual Survey of Hours and Earnings showed variations in the rate at which pay was increasing or not.

In Dorset, average annual pay in Bournemouth dropped by 8.1% to £19,132 while in Christchurch it rose by 7.4% to £20,524, according to the Office for National Statistics.

In Hampshire, average annual pay in Portsmouth fell 0.8% to £19,895 while in Southampton it dropped by 2.5% to £19,972.

Workers in Oxfordshire saw the average annual salary rise by 0.6% to £24,252 with a 6.7% increase in South Oxfordshire but a 3.1% drop in Cherwell.

Increased competition

In Berkshire, Reading saw a 5.5% drop in average annual pay to £22,838 but Windsor and Maidenhead saw pay rise by 2.9% to £31,501.

In West Sussex annual pay rose 1.1%; in Wiltshire it increased by 2.5% but in Surrey average yearly earnings dropped by 0.6%.

Mr Krosnar said consumers were feeling the pressure caused by the gap between the rate at which pay was increasing and inflation.

"There comes a point when the consumer has to reduce the amount that they buy," Mr Krosnar said.

The company employs 200 people in Dorset and makes brake discs for cars.

It has foundries in the UK and the Czech Republic which produce more than 100,000 tonnes of metal parts each year.

But it has experienced increased competition for raw materials from the booming BRIC economies of Brazil, Russia, India and China.

It said it was responding robustly to the inflationary pressures but ultimately the increasing costs of materials would have to be passed on to the customer which will reduce demand for their product.

Mr Krosnar said: "Raw materials are in much higher demand than they ever were before.

"It's really quite difficult to know what our government can do about such a problem."

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