UK service industry experiences record cost inflation – CBI – .

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UK service industry experiences record cost inflation – CBI – .


People sit inside a restaurant, amid the coronavirus disease (COVID-19) outbreak, in Chinatown, London, Britain on May 18, 2021. REUTERS / Hannah McKay

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LONDON, Nov. 30 (Reuters) – Costs are rising at the fastest rate in more than 20 years for companies in the UK service sector, according to a business survey released on Tuesday that shows why the Bank of England may soon increase its prices. interest rate.

The Confederation of British Industry said its quarterly service sector survey showed the fastest growing costs for business and consumer service companies since the survey began in 1998.

Separate data from Lloyds Bank showed that a record 50% of businesses planned to raise prices and a quarter expected to raise wages by 3% or more in the next 12 month.

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“Record cost growth threatens to freeze the recovery of the service sector over the winter,” said Charlotte Dendy, CBI economist.

Both investigations took place in the first half of November, before the announcement of the Omicron variant of COVID-19 dented the confidence of financial market investors who now see about a 60% chance that the BoE will raise rates. in December.

UK consumer price inflation hit a 10-year high of 4.2% in October and the BoE expects it to hit nearly 5% next year.

In the short term, higher interest rates will not relieve the pressure of a global surge in energy prices and supply chain difficulties. But they can reduce the spillover effects that would occur if companies raised prices and workers demand higher wages, in anticipation of persistently higher inflation.

CBI data from Tuesday showed companies already believe they won’t be able to pass on the higher costs in full. While average selling prices are expected to rise by a record amount, profit growth is expected to stall over the next three months for service companies, due to rising costs.

CBI recorded the fastest hiring since 2015 by business and professional service companies.

Data from recruitment site Indeed, also released on Tuesday, showed that vets, optometrists, auditors, facilitators and truck technicians were the roles their clients had the most difficulty filling.

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Reporting by David Milliken Editing by William Schomberg

Our Standards: Thomson Reuters Trust Principles.

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