Firms believe that employment will decline and inflation will hit four per cent in the next year, research by the Bank of England has shown, as tensions mount over spiralling wage and price growth over the next year. The Bank’s latest decision maker panel, a survey of business owners on
Mauricio Alencar
Friday 24 April 2026 10:45 am
Firms believe that employment will decline and inflation will hit four per cent in the next year, research by the Bank of England has shown, as tensions mount over spiralling wage and price growth over the next year.
The Bank’s latest decision maker panel, a survey of business owners on price expectations, has fuelled concerns that the UK economy is heading for a long period of stagflation.
Firms surveyed by the Bank said year-ahead consumer price index (CPI) inflation was four per cent in April, the highest level since January 2024.
The year-ahead CPI inflation reading for last month was three per cent.
Firms also expected to cut employment slightly while sales growth is expected to narrow in the next year. The reading for employment was slightly better than in March in what some analysts said was a “surprise”.
#mc_embed_signup { background: #fff; clear: left; font: 14px Helvetica, Arial,sans-serif; width: 100%; max-width: 600px; margin: 20px 0; } #mc-embedded-subscribe-form { margin: 20px 0 !important; } .newsletter-form-flex { display: flex; gap: 0; align-items: center; margin-top: -10px; } .newsletter-form-flex input[type=”email”] { flex: 1; padding: 2px 10px; border: 1px solid rgb(18, 22, 23) !important; border-radius: 12px 0 0 12px !important; } .newsletter-form-flex input[type=”submit”] { padding: 4px 10px !important; margin: 0 !important; background-color: rgb(18, 22, 23) !important; color: rgb(255, 255, 255) !important; border: 1px solid rgb(18, 22, 23) !important; border-radius: 0 12px 12px 0 !important; } .newsletter-banner-content { margin-bottom: 15px; } .newsletter-banner-content h2 { margin: 0 0 10px 0; font-size: 18px; font-weight: 600; } .newsletter-banner-content p { margin: 0 0 10px 0; line-height: 1.5; } .newsletter-banner-content ul, .newsletter-banner-content ol { margin: 0 0 10px 20px; } .newsletter-banner-content a { color: #0073aa; text-decoration: none; } .newsletter-banner-content a:hover { text-decoration: underline; } .newsletter-banner-content img { max-width: 100%; height: auto; margin: 10px 0; } #mc_embed_signup #mce-success-response { color: #0356a5; display: none; margin: 0 0 10px; width: 100%; } #mc_embed_signup div#mce-responses { float: left; top: -1.4em; padding: 0; overflow: hidden; width: 100%; margin: 0; clear: both; }
Wage growth expectations also inched up to 3.5 per cent from 3.4 per cent in the previous month.
The survey’s results will be closely analysed by Bank of England interest rate-setters who are looking for signs of changes in Britons’ expectations about prices and growth.
Read more Airfares, petrol pumps, rent: Inflation to jump due to Iran war
Data points of particular interest include wage and price expectations as the Monetary Policy Committee’s next few decisions could hinge on economists’ predictions about ‘second round effects’.
Some economists fear that higher price rises push employees to demand higher wages, fuelling inflation as costs are passed on to consumers. The behavioural effect was key to a surge in inflation to a high of 11 per cent after Russia’s full-scale invasion of Ukraine.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said the latest data would prompt the MPC “focus more on inflation surging than growth weakening”.
“Any doves on the Committee will likely have to dial back their arguments in the face of this data, while hawkish members may feel they have seen enough to push for a hike now, or enough to signal that they will do so in June,” Wood said.
The Bank’s researchers said that the Middle East war had “eroded” confidence that had been built earlier this year as firms believed interest rates would drop.
Its summary of business conditions found there was “little evidence” that the war had swayed pay settlement plans despite some fears that higher inflation could push companies to give staff larger packets.
Agents at the Bank said: “The impact on fuel and transport costs is being felt immediately. Food price inflation is likely to rise through the year. Impacts elsewhere will take longer and depend on how the balance plays out between higher costs and lower demand.”
Read more Bank of England: Businesses sharply raise inflation expectations
Similarly tagged content: Sections Categories
