U.K. Inflation Builds With Companies Planning 5% Price Increases
British companies are planning to boost prices by 5% in the next year, a Bank of England survey showed, indicating increasing inflationary pressures across the economy.
The reading, contained in the central bank’s monthly Decision Maker Panel survey of chief financial officers, was up sharply from 4.2% in November. It was the highest figure since the survey began in 2017.
The findings add to pressure on policy makers led by BOE Governor Andrew Bailey to rein in consumer-price growth that the central bank expects may reach 6% this year, triple its target. The surge in inflation reflects supply-chain pressures made worse by spread of the omicron variant of the coronavirus.
A separate survey of purchasing managers by IHS Markit showed higher prices for energy, transport and raw materials led to a sharp increase in cost burdens last month. It also showed input price growth eased from its peak in August. Markit revised up its index for services output in December to 53.6 from 53.2.
“Despite concerns that economic growth has weakened as we head into the new year, service providers signaled strong confidence about the longer-term business outlook,” said Tim Moore, economics director of Markit. “The degree of optimism has held steady since the autumn, suggesting that most businesses are only forecasting a temporary hit to demand from the omicron variant.”
The Office for National Statistics reported that labor shortages and cost pressures remained elevated in December with no sign of them easing.
According to ONS business insights and impacts survey, 36% of companies said their costs had risen “compared with normal expectations,” slightly below November’s reading of 38%. Another 15% said they were struggling to find staff, a level that has remained consistent since October.
Roughly 1-in-6 companies, or 16%, said they were raising prices more quickly than expected to cover the higher costs. The latest survey covered the period to Dec. 26 and tracked 8,851 companies.
The worker shortage remained most severe in the hospitality industry, where 37% of companies reported a lack of staff and 65% said existing staff were working longer hours, according to the ONS. The figures compared with 38% an 55% respectively in the previous survey for the two weeks to Dec 12.
The BOE survey found that 4% of workers were unable to work due to factors including sickness, self-isolation and child care, the highest proportion since the start of the pandemic. That’s adding the staffing pressures facing firms, 86% of which said they were finding it harder than normal to recruit new employees. Companies said they had raised prices by 5% over the previous year. The survey was conducted between Dec. 3 and Dec. 17 and received 2,755 responses.
©2022 Bloomberg L.P.