Why do UK firms plan to raise prices by 4% despite falling inflation expectations?

UK firms plan to raise prices by 4% in the coming year primarily to repair 'battered profit margins', even as their inflation expectations declined to 3.3% for the next 12 months — down from 3.7% in May — reflecting easing energy price pressures, including a recent plunge in oil prices following the US-Iran deal on the Strait of Hormuz. The Bank of England’s Decision Maker Panel (DMP) survey confirms that while fewer firms now expect to raise prices (57%, down from 64% in April), those that do still anticipate passing on costs at a steady 4% pace, indicating persistent cost pressures unrelated to near-term headline inflation trends.

What does the DMP survey reveal about wage expectations and their implications for the Bank of England?

The DMP survey shows firms expect wages to rise 3.5% over the coming year — up from 3.4% in May and above the Bank of England’s 2% inflation target — signaling ongoing labor cost pressures that could fuel second-round inflation effects. This wage outlook, combined with firms’ continued intention to raise prices by 4%, underscores why the BOE closely monitors the DMP: to assess whether the initial energy-driven inflation shock could become embedded via wage-price spirals, especially as the survey also notes a 'modest pickup in the labor market', with expected employment growth turning positive in June for the first time since February.

UK Firms Expect to Raise Prices 4% Even as Inflation Falls

Jul 3, 2026

UK firms plan 4% price hikes despite lower inflation expectations driven by an oil price drop following a US-Iran deal. The Bank of England's survey highlights ongoing cost pressures and margin repairs amidst shifting energy markets.

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