- The Bank found that companies have increased prices more strongly than 4.2% in November. This is the highest number since the survey began in 2017.
- The first reason for the sharp increase in inflation in the UK was the lack of workers. And another reason is said to be increased taxes from the Government.
Inflation pushes prices up in the UK
According to a survey by the Bank of England, companies in this country are planning to raise prices by 5% this year. This has proved that the pressure of inflation is increasing on the global economy. Specifically, the Bank found that companies have increased prices more strongly than 4.2% in November. This is the highest number since the survey began in 2017.
The finding puts three times more pressure on policymakers to rein in consumer price growth, which the central bank expects could hit 6% this year. Rising inflation reflects supply chain pressures made worse by the spread of the Omicron variant.
Another survey by IHS Markit, a London-based information provider, found that higher prices for energy, transport and raw materials led to a sharp increase in cost burdens last month. Specifically, Markit revised up the index for service output in December from 53.2 to 53.6.
According to the UK Office for National Statistics (ONS), 36% of companies have increased costs “well above normal expectations”, another 15% are having difficulty finding staff. The remaining 16% increased prices faster than expected to offset the increased costs. This shows that labor shortages and cost pressures have remained elevated since December 2021 with no signs of abating.
Causes of inflation?
“I do find it quite worrying in the U.K. because we’ve got a peculiar labor market with a lot of vacancies,” Davies said in a Bloomberg TV interview Thursday. “A lot of people have left the labor market but it appears many of them are not coming back.” This has pointed to the first cause of the sharp increase in inflation in the UK due to the lack of workers.
Specifically, according to the BOE, 4% of workers cannot work due to factors such as illness, isolation or having to stay at home to care for children due to the epidemic. This has caused companies to face pressure on personnel. 86% of them have more difficulty than usual when recruiting new employees.
Another reason is said to be increased taxes from the Government. In 2022, “my biggest worry is whether the government can stabilize the national finances,” Davies said, pointing to disquiet in Boris Johnson’s administration for planned tax rises in April to boost the Covid-battered health-care system while avoiding even greater public borrowing.