UK Businesses Feel Pinch as Energy Costs Squeeze Profit Margins

UK businesses reported steady price and wage growth in September, but are still feeling pressure from rising energy costs. According to the Bank of England's Decision Maker Panel survey, companies expect their prices to rise by 3.7% over the coming year, unchanged from August. This is reflected in actual annual price growth of 3.7% for the three months to September.

Firms also reported current annual wage growth of 4.0%, but expect this to slow by 0.6 percentage points over the next 12 months, with expected wage growth holding at 3.4%. Consumer price inflation one year ahead remains steady at 3.1%, while three-year inflation expectations remain unchanged at 2.8%.

Despite these numbers, UK companies are struggling to absorb the shock of rising energy costs. About 57% of firms expect to raise prices, while 7% expect to lower them. Meanwhile, 70% of businesses anticipate lower profit margins over the next year, up from 2 percentage points in April.