Consumers will face permanently higher prices for products if rising wages and energy costs persist, reveals fresh research published today.
Services firms are raising prices at the fastest pace on record to alleviate severe margin pressure stemming from rising bills, according to a survey by Lloyds Bank.
Soaring staffing and energy bills are sending costs higher in every sector in a sign elevated inflation could be entangled in the UK economy for years to come, Lloyds said.
Higher wages typically raise businesses costs over the long term, while energy inventories are often secured on a yearly basis, meaning elevated oil and gas prices could be baked into firms’ costs in the long run.
As a result, shoppers are likely to face “sustained” price rises as firms seek to maintain profits, Jeavon Lolay, head of economics and market insight at Lloyds, said.
Worryingly, input and output inflation is running hottest in the services industry, which is often touted as a sign price rises could continue.
Strong salary demands and climbing energy prices contributed to the second-fastest increase in service sector input costs on record, goosing pubs, bars and restaurants and the like into raising output prices at the quickest rate ever.
However, an unwinding in global supply chain snarl ups eased input rises for manufacturers, resulting in them raising prices at the slowest rate for eight months, Lloyds said.
Consumers are seemingly happy to swallow higher prices, according to separate research by ICAEW. Firms’ domestic sales climbed 5.3 per cent over the last year, the best rate of growth since 2007.
Meanwhile, the volume of sectors in Lloyds’ survey registering an uptick in activity rose to 11 out of 14.