How are energy investors positioned?
UK businesses continue to anticipate persistently high wage and inflation levels in the first quarter, despite indications of a gradual cooling in the labor market.
According to a Bank of England (BOE) survey of finance executives, companies foresee consumer prices rising by 3.2% over the next year—the highest projection in a year.
Businesses also plan to raise their own prices by 3.9%, only slightly down from the 4% increase expected in the previous quarter.
The BOE’s Decision Maker Panel survey further revealed that wage growth remains stubbornly high, with firms predicting a 3.9% rise in staff pay over the next year.
This figure remains well above the 3% level the BOE considers consistent with achieving its 2% inflation target.
These findings come as the BOE grapples with concerns over persistent inflationary pressures and strong wage growth, which are limiting its ability to cut interest rates.
BOE policymaker Megan Greene noted in a speech on Tuesday that while wage growth is slowing, the pace of decline is insufficient, reinforcing the need for restrictive monetary policy to curb inflation.
Although demand for workers has weakened following the Labour government’s payroll tax hike and a minimum wage increase introduced in its October budget, it has not collapsed.
Businesses anticipate employment growth of just 0.1% over the next year—a slowdown from the 1.1% increase recorded before the budget. However, this projection does not indicate widespread job losses.