UK firms have warned they think food inflation could jump as high as 7% this year as they increased their inflation outlook for the next year, according to Bank of England data.
It came as Bank officials also found that the conflict in the Middle East has “eroded” confidence that the economy will improve later this year.
A survey by the central bank of finance bosses across UK companies highlighted continued uncertainty over the business outlook.
The Decision Maker Panel (DMP) survey showed that firms expected to increase their prices by 3.8% over the next 12 months, according to data for the three months to April.
This is 0.3 percentage points higher than predicted over the three months to March.
Almost two-thirds of bosses (64%) said they expect to adjust to the recent energy shock by increasing their prices over the next 12 months.
Separate research by the Bank’s agents across the UK also highlighted concerns over rising inflation.
Businesses told Bank staff that they are worried about the conflict’s “potential impact on demand, supply chains and input costs”.
“But despite the uncertainty, apart from the small number of contacts who trade directly with the Middle East, few report significant impacts on their output, activity and intentions yet,” according to the research.
Nevertheless, firms said they fear that food inflation is likely to rise through 2026, “perhaps to 6% to 7%”, rather than falling back as previously expected.
Other sectors have also highlighted concerns over the impact of higher transport and energy costs.
