Firms predict faster increases in prices amid Middle East conflict

UK firms have said they expect to increase prices more quickly as they come under pressure from surging energy prices linked to the Iran war, according to Bank of England data.

The central bank’s latest survey of finance bosses across UK companies also highlighted growing uncertainty over the business outlook.

The Decision Maker Panel (DMP) survey showed that firms expected to increase their prices by 3.5% over the next 12 months, according to data for the three months to March.

This is 0.1 percentage point higher than predicted over the three months to February.

Meanwhile, the Bank’s single month data increased from 3.4% inflation expectations in February to 3.7% last month.

The survey said this pointed “to firms adjusting their expectations as a result of the recent increases in energy prices”.

Firms took part in the survey between March 6 and March 20, after the start of the conflict in the Middle East.

Nevertheless, oil and gas prices have been volatile in the following weeks and numerous industry groups have pointed to sharper inflation in recent data.

On Wednesday, the Food and Drink Federation predicted that food inflation could soar higher than 9% by the end of the year because of war in the Middle East.

Elsewhere in the fresh survey data, bosses highlighted a growing level of uncertainty as they tackle the impact of the conflict.

In March, 57% of firms reported that the overall level of uncertainty facing their business was high or very high, up by 10 percentage points from February.

Uncertainty around price inflation for the year ahead also grew for the month.