Brexit’s inflation threat stoked by biggest services cost hike in three years

SOARING costs among the UK’s dominant services firms hammered home the Brexit inflation threat today as companies jacked up prices at the fastest pace for nearly three years, a closely watched survey revealed today.

The Chartered Institute of Procurement & Supply’s latest snapshot of the critical sector came as the pound touched another 31-year low against the dollar today, dropping below $1.27 at one stage for the first time since 1985.

The Cips survey, spanning hotels and restaurants to accounts, showed the largest chunk of the UK economy still in growth territory during September.

Its activity index, where a score over 50 signals growth, eased slightly from 52.9 to 52.6 over the month.

But the sector is struggling under the largest rise in costs since 2013 thanks to the sharp fall in the value of sterling since the Brexit vote. That meant prices charged leapt at the quickest pace since January 2014, Cips said. As well as a weak pound, services firms have also seen costs increased by the introduction of the £7.20 an hour National Living Wage in April.

Cips chief executive David Noble said: “Input prices continued to remain a threat to margins... Firms raised their prices in response, to counteract increased costs for fuel, food and elevated wage bills and as the weaker pound had an effect.”

Survey compiler Markit said the average of its services, manufacturing and construction surveys suggested the economy was growing at a quarterly rate of 0.3%. City economists said the relative strength of the economy put a further cut in interest rates from Bank of England Governor Mark Carney (pictured) and his rate-setting colleagues next month in doubt.

Pantheon chief UK economist Samuel Tombs said: “we think that [the monetary policy committee] will refrain from cutting interest rates again in November.”