By Paul Hannon
U.K. businesses polled in April expected to raise their prices at a faster rate than they did prior to the conflict in the Middle East, but wage increases were seen slowing, according to a Bank of England survey released Friday.
In a separate release, the BOE's regional agents reported that while businesses are worried by the conflict, "few report significant impacts on their output, activity and intentions yet."
Some 2,030 chief financial officers were questioned between April 2 and April 17, with energy prices having jumped after the attacks on Iran in late February and remained high since.
The survey found that businesses expected the prices they charge to rise by 3.8% over the coming 12 months, an increase from the 3.5% recorded in March. Businesses reported that the prices they charge increased by 3.7% in the year to April.
Signs of a pickup in expected inflation will concern BOE policymakers, who meet next week to set policy and are expected to leave their key interest rate at 3.75%.
The U.K.'s annual rate of inflation rose to 3.3% in March from 3% in February, driven almost entirely by higher energy prices. Officials at the BOE expect inflation to push higher, but say they can do little to prevent that.
What matters most for officials is how workers and businesses that provide other goods and services will respond. They have said they would closely monitor new wage deals for signs that workers are securing bigger raises, which would pressure businesses to raise their own prices to preserve profit margins and lead to a longer period of higher inflation.
However, the survey suggests that businesses are reluctant to respond if workers demand higher wages to cover the costs of higher energy bills. The CFOs expected the wages they pay to rise by 3.4% over the coming 12 months, a slowdown from the 3.5% increase seen in March. In the year to April, they reported that wages rose by 4.3%.
The BOE's agents reported that with around 80% of 2026 pay deals now agreed, the average increase was around 3.5%, a little higher than the rate policymakers judge consistent with inflation meeting their 2% target.
"There is little evidence of a Middle East effect on pay yet, although some contacts acknowledge it as an upside risk to future settlements because of the higher inflation outlook," the agents said.
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
April 24, 2026 05:07 ET (09:07 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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