Key facts
- UK businesses expect price growth of 3.9% in the next 12 months, down from 4.1% previously.
- Year-ahead wage growth expectations have decreased to 3.4%.
- Realised annual own-price growth was 3.8% in the three months to May.
- Firms expect their own-price growth to increase to 4.0% over the next year.
- 57% of firms anticipate increasing their prices, and 68% expect lower profit margins.
British businesses are planning to implement smaller price increases and wage hikes in the upcoming year, according to the Bank of England's latest Decision Maker Panel survey. The survey, conducted in the three months to July, indicated that firms expect price growth of 3.9% over the next 12 months, a slight decrease from the 4.1% recorded in the previous period. Expectations for year-ahead wage growth also saw a marginal decline to 3.4%.
The May 2026 data from the same panel showed realised annual own-price growth at 3.8%, with expectations for year-ahead own-price inflation at 4.0%. Firms also reported annual wage growth of 4.2% in the three months to May, while expected year-ahead wage growth remained at 3.4%. Looking ahead, 57% of firms anticipate increasing their prices, and 68% foresee lower profit margins due to recent energy shocks.
Economists polled by Reuters do not expect the Bank of England to change its key interest rate from 3.75% on Thursday, and likely not for another year, as inflation is forecast to remain above the central bank's 2.0% target. British inflation dipped to 2.6% in June, partly due to a de-escalation in the Iran war reducing fuel prices, but this slowdown is unlikely to last as the conflict has reignited.
Inflation is expected to peak at 3.3% next quarter before moderating, but will not fall to the Bank's target until the end of 2027. Economic growth is forecast at 1.0% this year and 1.1% next. The European Central Bank left its key deposit rate on hold at 2.25%, but a separate poll suggests it will raise it to 2.50% in September.