British firms intend to hike prices five per cent this year

British businesses are laying the foundations to hike prices sharply this year as they scramble to survive amid soaring costs, reveal official figures published today.

UK firms are intending to raise prices five per cent this year, according to the Bank of England’s survey of chief financial officers of British businesses.

A toxic combination of an energy crunch in Europe, an ongoing labour squeeze and a recovery in oil demand has swelled firms’ costs across the board.

The Office for National Statistics (ONS) estimate prices for materials used by British factories have jumped over 14 per cent over the last year, with crude oil prices alone up over 80 per cent.

The ONS latest business insights and impacts survey, released today, found 36 per cent of businesses stated their costs had increased “compared to usual expectations”.

As a result, businesses are having to rejig pricing to protect their margins and remain viable in the long term.

A reduction in income stemming from a sharp pull back in spending as consumers exercised greater caution in the face of the Omicron variant is strengthening businesses’ incentives to hike prices. 

In the three months to December, UK firms lost seven per cent of sales due to the Covid-19 crisis, the Bank said.

The Bank’s own figures will agitate officials at Threadneedle Street, who are under pressure to get a grip on roaring inflation.

Economists at investment banking giant Goldman Sachs think the cost of living could climb as high as 6.8 per cent this April, driven higher by the energy regulator, Ofgem, hiking the energy price cap by around 50 per cent.

The Bank expects inflation to peak at six per cent.

Last month, members of the Bank’s monetary policy committee (MPC) voted 8-1 in favour of lifting rates 15 basis points from a record low 0.1 per cent, the first time borrowing costs have increased in over three years.

The MPC will announce their next rate decision on February 3.