Britons hoping for inflationary pressures to diminish might be forced to wait longer, with a major survey of UK firms to be published today showing the most services firms expect prices to increase since the financial crisis.
The survey by the British Chambers of Commerce (BCC) of more than 7,000 firms will show a balance of 36 per cent of firms in the dominant services sector expected their prices to rise at the end of last year, a sharp rise from the 28 per cent recorded in the previous quarter.
Manufacturing firms see even sharper price rises, with a 50 per cent balance expecting to charge more, reflecting the continued pressure from raw material inputs.
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Figures from the London Chamber of Commerce and Industry (LCCI) published yesterday showed a sharp increase in the balance of firms in the capital reporting higher costs for raw materials sourced from the UK.
Suren Thiru, head of economics at the British Chambers of Commerce, said: “Inflation remains a concern, with a significant spike in inflation expectations in the quarter.”
The Bank of England will struggle to bring inflation back to target “for a prolonged period, maintaining the cost pressures on both consumers and businesses”, Thiru added.
Inflation reached 3.1 per cent in the year to November 2017, with Bank of England governor Mark Carney now forced to write a letter to the chancellor explaining why it has risen by more than a percentage point from the two per cent target.
The Bank believes inflation will peak at around 3.2 per cent, before falling back slowly towards target over the next three years. The latest figures for December will be published next week.
The rise of inflation over the last year has acted as a drag on growth, the BCC said. Growth and confidence “remain subdued” compared to historical levels, said BCC director general Adam Marshall.
Business confidence fell across the UK, while the LCCI’s figures for the capital’s firms also show a balance of eight per cent of firms expecting performance to weaken over the next year, with profit expectations at a joint-record low.
Thiru said: “Looking forward, the UK economy is set to continue on an underwhelming growth trajectory over the near term with uncertainty over the impact of Brexit coupled with high inflation and weak productivity likely to dampen overall economic activity.”
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