U.K. Businesses Gear Up to Raise Prices, Survey Finds

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Almost 60% of U.K. companies are planning to raise their prices to recover rising supply-chain costs and wages, according to a closely watched business survey.

The thrice-yearly outlook from Accenture and IHS Markit pointed to a “further sharp rise in consumer prices” as inflation spreads more generally across the economy. 

Inflation is already above the Bank of England’s 2% target and on track to reach 5% after an anticipated jump in regulated energy prices in April, piling pressure on policy makers to raise interest rates. Key economic data on inflation and jobs that are likely to drive the BOE rate-setting agenda will be published this week. 

The report’s findings, published Monday, suggested that staff will demand bigger pay rises to compensate for rising costs. That’s likely to reinforce market expectations for the BOE to lift rates from 0.1% to 0.25% in December.  

The poll of 12,000 businesses globally, including 1,400 in the U.K., found staff and non-staff costs rising to unprecedented levels, while the number of firms intending to increase their prices were also at record highs in both the manufacturing and service sectors.

“Whilst primarily driven by global supply-side risks, firms increasingly expect to see wages rise as the labor market tightens and living costs increase,” according to the report. “The rapid surge in energy costs also served to exacerbate fears that business expenses will spiral upwards.”

With cost pressures set to outstrip price increases, fewer firms on balance expected to increase profits. Businesses also remained concerned about skill shortages, with only 35% confident they would be able to get the people they need over the next 12 months. Business confidence fell to its lowest level this year. 

“The high levels of business confidence we saw earlier this year have been tempered by some strong economic and unanticipated headwinds,” said Simon Eaves, market unit lead for U.K. & Ireland at Accenture. “Despite this, business optimism in the U.K. remains higher than in most other European nations. Supply-chain challenges and labor shortages cannot be fixed overnight, but it is critical that business leaders adapt.”

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