UK services industry sees record cost inflation: CBI

London — According to a business survey released Tuesday, the Bank of England’s business survey shows why it will soon raise interest rates, and the cost of companies in the UK services sector is rising at the fastest rate in more than 20 years.

The Confederation of British Industry said a quarterly survey of the services sector showed the fastest growth in costs for both enterprises and consumer service enterprises since the survey began in 1998.

According to data separate from Lloyds Bank, 50% of companies plan to raise prices, and a quarter of them expect a price increase of more than 3% in the next 12 months.

“A record increase in costs could bring a winter freeze to the recovery of the services sector next quarter,” said Charlotte Dendy, economist at CBI.

Both surveys were conducted in the first half of November, with news of the Omicron variant of COVID-19 damaging financial market investors’ confidence and the BoE’s chances of raising interest rates in December about 60%.

The UK consumer price index will reach a 10-year high of 4.2% in October, and the BoE is expected to reach nearly 5% next year.

In the short term, higher interest rates will not relieve pressure from global soaring energy prices and supply chain difficulties. However, it may reduce the knock-on effect that occurs when companies raise prices and workers demand higher wages in anticipation of a permanent rise in inflation.

Tuesday’s CBI data show that companies already believe they can’t fully pass on high costs. Average selling prices are expected to rise to record highs, but service company profit growth is expected to stagnate in the next three months due to rising costs.

CBI reports the fastest adoption since 2015 by business and professional services companies.

Veterinarians, optometrists, auditors, animators, and truck engineers were the roles that customers found most difficult to fulfill, according to data from Indeed, also released on Tuesday.