UK Firms Expect Prices to Rise by 3.7% Over Next Year Despite Energy Costs

UK businesses expect prices to rise by 3.7% over the next year, according to the Bank of England's latest survey. This is a slight decrease from their previous estimate, despite high energy costs continuing to pressure profit margins.

The Bank of England's Decision Maker Panel survey, which received responses from 1,993 UK businesses between September 4 and 18, found that firms expected output price inflation to remain unchanged over the next year. Their actual annual price growth also stood at 3.7% in the three months to September, unchanged from the previous period.

Broadly speaking, inflation expectations remained stable, with businesses expecting consumer price inflation (CPI) to be 3.1% one year ahead and 2.8% over three years. Wage growth also showed a similar trend, with firms reporting annual wage growth of 4.0% in the three months to September.

However, higher energy costs continue to weigh on businesses, with 57% of firms saying they expect to increase prices due to this factor. This was down seven percentage points from April and two percentage points from August. Meanwhile, 70% of firms said they expected the energy shock to reduce their profit margins, up two percentage points from April.