Firms in the UK and the EU have not been using the cover of inflation to gouge their customers, new research from the Bank of England suggests.
Using a sample of more than 1,000 large companies, researchers at the Bank concluded that the corporate sector has not seen “an abnormally large increase in profits during the period of high inflation.”
Although profits increased “significantly” in nominal terms, particularly in the UK, firms also faced rocketing input costs.
Total costs have increased by around 60 per cent in the Euro area since 2020 and around 80 per cent in the UK.
“We find no evidence of a rise in overall profits in the UK – prices have gone up alongside wages, salaries and other input costs,” the researchers said.
Although the Bank did not find evidence of higher profits across the corporate sector as a whole, it noted that oil and gas firms “consistently buck the trend”.
Oil and gas firms have seen an increase in their profit share larger than five percentage points, as have utilities firms and ‘other services’ – which includes gambling and leisure.
Energy giants have seen bumper profits over the past couple of years after Russia’s invasion of Ukraine sent energy prices soaring. Politicians in the UK imposed a windfall tax on oil and gas firms as a result of their surge in profits.
Greedflation is the idea that companies have been exploiting high levels of inflation to charge their customers higher prices, sustaining the increase in inflation.