Seven in ten UK firms expect the recent energy shock to cut their profit margins over the next year. That is the finding of the Bank of England's Decision Maker Panel survey for September, published on 2 October. Fewer firms now expect to pass the cost on through higher prices.
01What firms told the
02Decision Maker Panel
The Decision Maker Panel surveys finance chiefs at small, medium and large UK businesses. The September survey ran from 4 to 18 September and drew 1,993 responses.
Since April it has asked how firms expect the energy shock to affect them over the next 12 months. In September, 70% expected lower profit margins. That is 2 percentage points higher than in April.
Only 57% expected to raise prices. That is 7 percentage points lower than in April.
03Why prices are rising more slowly
Firms expect their own prices to rise by 3.7% over the next year. That is slightly lower than in the three months to August.
Wage growth is running at 4.0%, and firms expect it to ease to 3.4%. Employment fell by 0.2% over the past year. Firms expect it to grow by 0.2% over the next.
So costs are still rising, but many firms think customers will not accept higher prices. The difference comes out of the margin.
04Protecting cash flow when margins shrink
A thinner margin leaves less cash each month to cover repayments. Three things are worth doing before winter bills arrive.
First, check your prices against your real costs. Second, look at how your existing borrowing is structured. Several loans with different payment dates can sometimes be combined into one, though that does not always lower the total cost. Our guide to when business debt consolidation helps and when it costs more works through the numbers.
Third, arrange any working capital headroom while your accounts still look healthy. Borrowing to cover a loss that repeats every month only delays the problem. Our page on growth business finance explains how we can help.
The next Decision Maker Panel results are due on 30 October.
