UK firms report biggest jump in price expectations in nearly two years, BoE survey shows
- By Reuters -
- Apr 02, 2026
UK companies expect to raise prices more quickly in the coming 12 months as they respond to a surge in energy prices due to the Iran war, cut jobs and raise pay by less than before, a Bank of England (BoE) survey showed on Thursday.
The BoE is keeping a close watch on companies’ pricing plans as it tries to gauge how much of the spike in energy prices caused by the Iran war will be passed on and push up inflation.
The monthly Decision Maker Panel showed firms polled in March expected to raise their prices by 3.7% over the next year, the most since October.
This rate was up from 3.4% among firms surveyed in February, before the start of the conflict, and represents the biggest month-to-month increase in the rate since April 2024.
BoE Governor Andrew Bailey told Reuters in an interview on Wednesday that firms had limited pricing power to pass on cost increases to their customers although some pass-through of higher energy costs was likely.
Firms’ expected year-ahead wage growth fell to 3.5% on a three-month moving-average basis in March and 3.4% on a monthly basis, both the lowest since the series started in 2022.
Companies also said they expected to cut jobs, with average staffing levels expected to fall 0.3% over the coming year compared with a 0.3% increase expected in February.
Businesses expected consumer price inflation of 3.5% in the coming 12 months, the highest since December 2023 and 0.5 percentage points higher than in February, making it the biggest month-on-month jump since September 2022.
“More dovish members on the Monetary Policy Committee will likely be tempted to discount that increase as news-driven noise for now. But rate setters will be acutely aware of other measures of households’ inflation expectations jumping recently … so risks of second-round effects will remain a major worry,” said Elliott Jordan-Doak, senior economist at Pantheon Macroeconomics.
Britain’s headline rate of inflation held at 3.0% in February and had been expected to fall to near the BoE’s 2% target in April before the Middle East conflict, but the BoE now forecasts it will rise towards 3.5% in the middle of the year.
Investors added to their bets on interest rate hikes by the central bank on Thursday and are fully pricing in two quarter-point hikes this year.
The BoE survey was conducted from March 6-20, after the US.-Israeli attacks on Iran started on February 28, and received 2,004 responses.