Olivier and Mann – The Bank of England (BOC) has warned that later this year, price rises that have already affected fuel and foodstuffs are likely to hit other sectors.
The bank’s monthly business conditions report indicated that the cost of producing products would increase also.
The companies, who hedged against the impact of the pound’s devaluation in 2016, will soon see their contracts expire leading to higher costs.
The country’s exports and strong domestic demand have supported investment.
The BOC said that the major impact on the prices of commodities thus far had been the increase in prices of fuel and food.
Even more commodity prices are likely to be affected in 2018, which will push inflation higher.
The increasing cost of air travel and food has fueled inflation growth in the UK to reach its highest in more than four years.
The yearly Consumer Prices Index (CPI) rate of inflation went up to 1.6 percent, up 0.4 percent since November, said the Office for National Statistics (ONS) and the increasing cost of imported products and oil have forced production costs to rise also.
The depreciation of sterling between June and August, from $1.49 to around $1.25 today has increased the expenses of many companies because the prices of many raw materials and oil are priced in dollars.
The February 2016 data showed a marginal increase in labour cost growth this year because of the scarcity of manpower. The data also said that the 0.5 percent apprenticeship levy will increase costs for businesses. The UK is aiming to generate an annual £3 billion from the levy and pay for 3 million apprenticeships.
The BOC based its report from data that was gathered from different companies between late 2016 up to the middle of last month.