Speculation inflation in the UK could breach eight per cent in April is looking even more certain as businesses prepare to hike prices to combat swelling costs, reveals a fresh survey released today.
Economists’ bets on the Bank of England’s forecasts for inflation to peak at 7.25 per cent this April being undercooked are looking increasingly valid.
A net 26 per cent of British services firms are intending on lifting prices over the next three months, according to research by the business group the Confederation of British Industry (CBI).
A tight jobs market is pushing businesses’ costs to eye watering levels, resulting in them being forced to either raise prices or let their margins be squeezed.
Over the next quarter, around three in four services firms expect costs to increase further, the CBI said.
Inflation is already running at a near 30 year high of 5.5 per cent, according to the Office for National Statistics (ONS).
However, most economists expect the rate of price rises to accelerate in the coming months, culminating in April when a 54 per cent uplift to the energy price cap and higher food prices could push inflation above eight per cent.
“Rising inflation and cost pressures are hitting firms’ profitability and their bottom line. The spectre of further price increases is being felt across the board,” Charlotte Dendy, head of economic surveys at the CBI, said.
The outbreak of war between Russia and Ukraine is anticipated to intensify inflationary pressures in the UK economy if it leads to Western sanctions on energy flows from Moscow into Europe.
Britain is less reliant on Russia for energy supplies. However, prices are responsive to rates set in European energy market rates, meaning the cost to Britain of securing oil and gas inventories is likely to increase.
UK households are already facing a once-in-a-generation cost of living squeeze that could erode their living standards at the worst rate since the late 1940s, casting doubt over the strength of Britain’s economic recovery from the pandemic this year.
Before the conflict, the Bank of England was widely expected to press ahead with tightening monetary policy.
Traders still think the Bank will lift rates again at its meeting on 17 March.