UK firms plan to raise prices by less than thought in April, survey finds

UK firms have said they expect to increase prices less sharply than predicted in the aftermath of the Iran war, but more than half still plan to do so in response to the energy shock, according to Bank of England data.

The central bank’s latest survey of finance bosses across UK companies suggested that price growth expectations had eased back slightly in May from the month before.

The Decision Maker Panel (DMP) survey showed that firms expected to increase their prices by 4% over the next 12 months, according to data for May.

This is 0.4 percentage points lower than predicted in April.

However, data for the three months to May also shows firms expect to raise prices by 4% over the year ahead, which is 0.2 percentage points higher than predicted in the three months to April.

The single-month figure also remains well above the 3.4% price growth that firms were expecting in February before the US-Israeli war with Iran started.

More than 2,000 finance chiefs from a range of UK businesses took part in the survey between May 8 and 22.

Firms were also asked how they expect the recent energy shock to affect their business in the year ahead, with higher prices and lower profit margins continuing to be the most common forms of change cited in May.

Oil and gas prices soared in March and April because of the effective closure of the Strait of Hormuz in the Middle East, a key international transit point for the commodities.

But prices eased back slightly last month with Brent crude oil currently trading at about 95 dollars a barrel, having hit a peak of 120 dollars in April.

Some 57% of firms surveyed by the Bank nonetheless expect to increase their prices in the next 12 months, compared with 5% who expect to lower prices.

More than two thirds sad they were anticipating lower profit margins amid the cost of fuel, energy and transportation being pushed higher.

However, businesses do not appear to be yielding to wage demands since the Iran war, with less than a quarter expecting wages to be higher in the next 12 months, and 19% predicting that wages will be lower, according to the survey.