UK services inflation accelerates at record pace as cost of living squeeze intensifies

UK businesses are raising prices at the fastest rate on record as Brits prepare for a once-in-a generation cost of living squeeze, reveals a closely watched survey published today.

Prices for products produced by services businesses, including pubs, restaurants and bars, rose at the quickest pace since 1996, according to IHS Markit.

Soaring raw material and labour costs have prompted services firms to lift prices in a bid to protect margins.

Input costs accelerated at the second quickest pace on record, IHS Markit.

“Record price increases in the service economy are set to add to the cost of living crisis for UK households,” Tim Moore, economics director at IHS Markit, warned.

The fresh data reinforces separate forecasts published by the Bank of England today illustrating Britain is headed for a historic inflation crunch. 

Fresh forecasts released by the Bank of England today estimate UK inflation will top seven per cent in April, driven higher by the energy regulator, Ofgem, hosting the cap on bills 54 per cent.

Most households in the country will see their energy bills climb around £700.

Services inflation tends to be stickier than price rises emanating from goods, underlining the potential for inflation to trend sharply higher and for longer.

“Input cost inflation accelerated again in January and service providers responded by increasing their prices,” Moore added.

The Bank today said underlying wage tensions are intense in the economy, driven by an extremely tight labour market, likely putting further upward pressure on prices in the coming months.

Despite the record price jump, IHS Markit’s purchasing managers’ index (PMI) for the UK services industry rose over the last month, up to 54.1 in January from 53.6 in December.