Photographer: Chris Ratcliffe/Bloomberg

U.K. Services Firms Plan to Increase Prices by Most in a Decade

  • CBI survey shows price expectations at highest since Feb. 2007
  • Consumer-services sales gauge at strongest level since 2015

U.K. services companies plan to raise their prices at the fastest pace in almost a decade as their margins are squeezed by higher costs.

Business-services companies such as accountants and law firms expect to increase average selling prices in the next three months by the most since February 2007, according to a quarterly survey by the London-based Confederation of British Industry. Consumer-services providers such as hotels and restaurants predict they will raise prices by the most in nine years.

The survey follows a CBI report last week that showed retailers also plan to jack up prices, adding to evidence that U.K. inflation is rapidly building momentum as the weak pound drives up import costs. The Bank of England, which kept interest rates at a record low this month, says that inflation won’t get out of hand as long as higher price expectations don’t prompt workers to push for higher wages.

The survey showed business volumes climbed for the first time since May in the three months through February, with a gauge of consumer services sales rising to its highest since August 2015. Sentiment in business services stabilized in the period, having fallen sharply through 2016, while optimism in consumer services rose for the first time in three quarters, the lobby group said.

“The service sector is ticking along with business volumes holding up this quarter and a less pessimistic outlook on the office and shop floor than in recent months,” CBI Chief Economist Rain Newton-Smith said in a statement. However, increasing pressure on margins and expectations of strong price increases is “making the business environment that bit tougher,” she said.

The survey questioned 121 business-services companies and 58 firms from consumer services between Jan. 27 and Feb. 14.

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