UK firms expect 3.7% price rise over next year, says BoE survey

UK businesses expect prices to rise by 3.7% in the next year, a slight decrease, according to a Bank of England survey. High energy costs continue to pressure profit margins, though inflation and wage growth expectations remain stable.

Outside view of Bank of England (File Photo/ANI)

Price Inflation Expectations Ease Slightly

UK businesses expect the prices they charge to rise by 3.7 per cent over the next year, slightly lower than their previous estimate, even as higher energy costs continue to put pressure on profit margins, according to the Bank of England’s latest Decision Maker Panel (DMP) survey.

The year-ahead own-price inflation, which measures how much firms expect their selling prices to increase, stood at 3.7 per cent in the three months to September. This was 0.1 percentage point lower than the previous three-month period. “Businesses therefore expect output price inflation to be unchanged over the next year, based on three-month averages,” the Bank of England said in its September 2026 DMP release. Firms reported that their actual annual price growth also stood at 3.7 per cent in the three months to September, unchanged from the previous period.

Stable Inflation and Wage Growth Outlook

Meanwhile, broader inflation expectations remained stable. Businesses expected consumer price inflation (CPI) to be 3.1 per cent one year ahead, unchanged from the previous survey. Three-year-ahead CPI inflation expectations also remained unchanged at 2.8 per cent.

Wage growth showed a similar trend. Firms reported annual wage growth of 4.0 per cent in the three months to September, while their expectations for wage growth over the next year remained at 3.4 per cent. “This implies that firms expect their wage growth to decline by 0.6 percentage points over the next 12 months,” the release said.

Energy Costs Pressure Profit Margins

However, higher energy costs continued to weigh on businesses. In September, 57 per cent of firms said they expected to increase prices due to higher energy costs. This was down seven percentage points from April and two percentage points from August.

At the same time, 70 per cent of firms said they expected the energy shock to reduce their profit margins, up two percentage points from April. This indicates that businesses expect to absorb some of the higher costs instead of passing the full impact on to consumers through higher prices.

Weak Employment Conditions Persist

Employment conditions remained weak. Firms reported annual employment growth of minus 0.2 per cent in the three months to September, unchanged from August. However, expectations for employment growth over the next year improved slightly to 0.2 per cent.

The survey was conducted between September 4 and 18 and received responses from 1,993 UK businesses. The Decision Maker Panel is operated by the Bank of England in collaboration with King’s College London and the University of Nottingham. (ANI)

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