98% UK business leaders expect operating costs to soar

According to the survey, record number of UK business leaders expect operating costs to soar this year as inflation proves more sticky than thought. The latest quarterly survey of chief finance officers at leading British companies found that 98% believe operating costs will rise in the year ahead, a level not seen since the question was first asked in 2011. Almost half of those, 46%, said the increase will be “significant.” More than three quarters of finance leaders, 78%, also expect inflation will still be well above the Bank of England’s target at 2.5% in two years’ time. The BoE’s forecast is for a drop to 2.1%.
Geopolitics has overtaken Covid as the top risk facing business. With the exception of the pandemic, it’s a greater concern than any other factor since the question was first asked in 2014. High inflation, rising interest rates and labor shortages also ranked high on the list of challenges ahead.
However, there are few business leaders who also believe the BoE will be able to bear down on inflation as effectively as its rate-setters believe. More than half, 53%, expect inflation to settle between 2.5% and 3.5% in two-years’ time, and a quarter expect it to remain above 3.5%.
With operating costs escalating, 71% of finance directors expect profit margins to be squeezed. Even so, three quarters expect revenues to rise. The findings of the survey underscore the scale of the cost shock that companies are experiencing as they grapple with both supply chain and energy disruption caused by the war in Ukraine and already high prices as a result of lockdowns during the pandemic.