UK cost inflation spike

UK businesses are being hit by the fastest rise in input costs in years, with fuel, transport and raw materials all getting more expensive. (pmi.spglobal.com) In March 2026, S&P Global said input cost inflation in UK construction jumped to its highest level in more than three years, and the month-to-month acceleration was the sharpest in nearly three decades of its survey data. Construction firms said the war in the Middle East had pushed up fuel, transportation and raw material prices. (pmi.spglobal.com) The squeeze was not limited to builders. S&P Global’s services survey for March showed input price inflation at its highest since April 2025, with companies linking the increase to fuel, transport, raw materials and wage costs; the services activity index slowed to 50.5 from 53.9 in February. (pmi.spglobal.com) Official inflation data is now moving the same way. The Office for National Statistics said consumer price inflation rose to 3.3% in March from 3.0% in February, while services inflation — a measure the Bank of England watches closely — rose to 4.5% from 4.3%. (ons.gov.uk) That matters because the Bank of England’s target is 2%, and it has already said the Middle East war has disrupted energy transport and supply, pushing inflation higher than it expected this year. The Bank Rate was 3.75% after the bank’s March 19 decision, and the next rate call is due on April 30, 2026. (bankofengland.co.uk) Wage growth is adding another layer of cost pressure. The Office for National Statistics said regular pay was up 3.6% in the three months to February 2026, with public-sector regular pay growth at 5.2% and private-sector growth at 3.2%. (ons.gov.uk) Businesses are reporting that they cannot absorb all of those increases. The Office for National Statistics said 40% of trading businesses paid more for goods or services bought in March, up 11 percentage points from February, while 15% raised the prices they charged and 28% expected to do so in May. (ons.gov.uk) Energy is a bigger part of that calculation than it was a month earlier. In early April, 66% of businesses told the Office for National Statistics they had at least some concern about energy prices, and 34% of firms considering price rises for May cited energy as a reason. (ons.gov.uk) Supply chains are starting to show strain again too. The Office for National Statistics said 9% of businesses reported global supply-chain disruption in March, up from 3% in February, and 46% of those firms cited conflict in the Middle East as a reason. (ons.gov.uk) The immediate question is how much of this cost surge reaches households. The Bank of England has said pass-through from higher costs is something it is watching closely, and companies are already reporting thinner margins as they try to decide how much they can charge. (bankofengland.co.uk, pmi.spglobal.com)