Bailey: UK firms absorbing energy costs, delaying price hikes

Key facts

• Businesses are cutting costs and squeezing margins to absorb higher energy bills.
• Many firms are reducing headcount to avoid passing costs to consumers.
• Evidence of inflation spreading broadly remains subdued, but could increase if energy costs persist.

Bank of England Governor Andrew Bailey stated that British businesses are currently absorbing rising energy costs by cutting expenses and reducing profit margins, rather than increasing prices for consumers. Speaking at the International Monetary Fund’s annual meetings in Bangkok, Bailey noted that many companies are also reducing their workforce. He indicated that while there is currently limited evidence of inflation from energy prices spilling over into the broader economy, this situation could change if high energy costs persist. The comments precede an upcoming Monetary Policy Committee meeting where a decision on interest rates will be made.