LONDON, Nov 30 (Reuters) - Costs are rising at the fastest
rate in over 20 years for firms in Britain's services sector,
according to a business survey released on Tuesday which shows
why the Bank of England may soon raise interest rates.
The Confederation of British Industry said its quarterly
survey of the services sector showed the quickest growth in
costs for both business and consumer services companies since
the survey began in 1998.
Separate data from Lloyds Bank showed a record 50% of
businesses plan to raise prices and a quarter of them expect to
raise pay by 3% or more over the next 12 months.
"Record growth in costs is threatening to put a winter
freeze on the service sector recovery next quarter," CBI
economist Charlotte Dendy said.
Both surveys took place in the first half of November,
before news of the Omicron variant of COVID-19 dented the
confidence of financial market investors who now see a roughly
60% chance that the BoE will raise rates in December.
British consumer price inflation hit a 10-year high of 4.2%
in October and the BoE expects it to reach nearly 5% next year.
In the short run, higher interest rates will not reduce
pressure from a global surge in energy prices and supply chain
difficulties. But they may reduce knock-on effects that would
come if companies increase prices, and workers ask for higher
pay, in anticipation of permanently higher inflation.
Tuesday's CBI data showed businesses already think they will
be unable to pass on higher costs in full. Although average
selling prices are expected to rise by a record amount, profit
growth is expected to stall over the coming three months for
services firms, due to the rise in costs.
The CBI reported the fastest hiring since 2015 by business
and professional services companies.
Data from recruitment website Indeed, also released on
Tuesday, showed vets, optometrists, auditors, animators and
truck technicians were the roles that their customers were
finding it hardest to fill.
(Reporting by David Milliken
Editing by William Schomberg)