- Purchasing‑manager surveys show UK service providers faced the largest jump in cost inflation since data began in 1996, as the Iran war pushed petrol and diesel prices sharply higher.
- The month‑on‑month rise in cost pressures is the greatest since the series started, reflecting a sudden increase in fuel bills and input costs.
- S&P Global’s survey also found overall input cost inflation at its highest since November 2022, with firms citing raw material shortages and shipping disruptions due to the Middle East conflict.
UK businesses are facing a price squeeze not seen in decades as the Iran war drives up energy costs.
In the latest survey by S&P Global and the Chartered Institute of Procurement & Supply, service-sector firms reported the sharpest month‑to‑month acceleration in cost pressures since the series began in July 1996. The jump reflects soaring fuel prices, which have surged after closures in the Strait of Hormuz and OPEC suppliers’ output cuts.
The report’s authors said service‑provider cost inflation was the highest in at least 30 years, with the rapid rise since March unprecedented. The survey notes that manufacturing production rebounded in April as companies rushed to build inventories ahead of expected price hikes. Yet raw material shortages and shipping disruptions – both consequences of conflict in the Gulf – also weighed on output.
Across the private sector, S&P Global found input cost inflation at the highest level since November 2022. Companies blamed the jump on higher energy, transport and materials prices.
Meanwhile, the flash PMI composite output index rose to 52 in April, signalling modest growth after stagnation in March. However, business optimism slipped to its lowest level in a year, reflecting fears that price shocks could undermine demand.
The inflation surge follows government data showing consumer price inflation accelerated to 3.3% in March, up from 3.0 %, driven by the biggest monthly rise in fuel prices for more than three years. Petrol prices rose 8.6 pence per litre and diesel jumped 17.6 pence, highlighting the strain on households and transport‑dependent services.
Mixed growth signals
The spike in services cost inflation underscores the second‑round effects of energy shocks. High fuel prices feed into transport costs, logistics and supply chains, pushing up prices for consumers and eroding profitability.
The acceleration since March indicates that price pressures are gaining momentum, even as overall inflation remains below the Bank of England’s target. Persistent inflation could force the Bank to consider further rate hikes, tightening financial conditions and dampening investment.
The report also highlights the interconnectedness of global events: supply constraints and shipping delays due to Middle East hostilities are hurting production far from the conflict. Businesses should review hedging strategies, explore energy efficiency and adopt resilient supply chains as fuel-led inflation pressures become the new normal.
