Fewer UK companies plan to increase prices, survey shows

Commuters walk pass the Bank of England in the City of London financial district in London

LONDON (Reuters) - Fewer British firms plan to raise their prices in the coming months, according to a survey that will give reassurance to the Bank of England as it considers the possibility of cutting interest rates as soon as next month.

In a latest sign of the improving economic picture inherited by new Prime Minister Keir Starmer, the British Chambers of Commerce said 39% of member companies it surveyed expected to raise prices over the next three months, down from 46% in its previous survey published in April.

"Concern about inflation among businesses has dropped to levels last seen in 2021," David Bharier, head of research at the BCC, said. "A Bank Rate cut later this year will help bring down borrowing costs."

The chance of the BoE cutting its benchmark Bank Rate to 5.0% from 5.25% on Aug. 1 is seen as more than 50-50 by investors after headline inflation recently fell to the central bank's 2% target and measures of inflation pressure also eased.

The BCC survey showed sales and cashflow improved in the second quarter of 2024 to pre-pandemic levels and the share of firms expecting an increase in turnover in the next 12 months rose to 58% from 56% in the April survey.

However, 75% of respondent firms were still not increasing investment, albeit with wide variations between sectors - 42% of transport and logistics firms said they had increased investment levels compared with only 19% of retail companies.

Starmer has said he hopes the prospect of political stability after 14 often turbulent years under the Conservatives will encourage companies to invest more.

The BCC survey was based on responses from 4,967 companies - 91% of them with under 250 employees - polled between May 13 and June 10.

(Writing by William Schomberg; editing by Suban Abdulla and Elaine Hardcastle)