UK businesses to maintain price increases as Iran war impact continues.


UK firms expect own-price inflation to increase slightly over the coming year, according to a survey released on Friday by the Bank of England, as lag effects of the energy crisis continue to weigh on bottom lines.

Bank of England

Source: Sharecast

The central bank's Monthly Decision Maker Panel, which surveys chief financial officers from small, medium and large UK businesses, showed that prices were 3.8% higher year-on-year over the three months to June, unchanged from the three months to May.

However, expectations for own-price inflation over the coming year were 4.1%, up from 4.0% in May's survey, with businesses predicting output price inflation to rise by 0.3 percentage points over the next 12 months.

CFOs' expectations for year-ahead consumer price inflation were unchanged over the month at 3.7%, though their three-year-ahead projections rose to 2.9% from 2.8%.

Wage inflation cooled slightly, with wages up 4.1% over last year, down from 4.2% in May's survey, though wage growth expectations for the year ahead rose to 3.5% from 3.4%.

"Since April, the DMP survey has asked firms how they expect the recent energy shock to affect their business over the next 12 months. In June, higher prices and lower profit margins remained the most common forms of adjustment, although the expected impact on prices continued to ease," the BoE survey said.

Some 56% of firms predict to increase prices, down 8 percentage points since April, while 66% expect lower profit margins, which was more or less steady over recent months.

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