UK business inflation pressures hit three-year high as Nobel economics prize awarded

UK businesses are contending with the sharpest inflation pressures in three years, according to the accountancy and advisory firm BDO, whose inflation index climbed to 103.65 in September from 102.18 in August — its highest reading since June 2023, as Theguardian reported on Monday.

BDO attributed the increase to rising energy, fuel and raw material costs, and said output fell across UK manufacturing and services last month as domestic demand softened. The same morning, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was due to be announced in Stockholm from 10.45am UK time, and the UK chancellor, John Healey, was travelling to Bangkok for the annual meetings of the IMF and World Bank.

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Key facts

• BDO’s inflation index rose to 103.65 in September from 102.18 in August, the highest since June 2023.
• The Institute for Fiscal Studies calculated that Chancellor John Healey faces a funding gap of up to £35bn, warning his budget risks being a “work of fiction” without a plan to cover spending pressures.
• Brent crude was 0.25% lower at $104.46 a barrel after Trump said Ukraine and Russia had agreed to halt attacks on each other’s energy facilities, following the US diesel-supply deal with Moscow announced on Friday night.
• Recruitment firm Hays reported a 3% fall in net fees for July to September and said there was “ongoing fragility in Northern Europe”; its shares fell 9%.
• The FTSE 100 opened up 53 points, or 0.5%, at 10,604, led by banks including HSBC, up 2.1%, and Standard Chartered, up 1.8%.
• The Nobel economics prize is the sixth and final award of this year’s cycle, according to Npr, which reported that it would be announced in Sweden on Monday.

Costs squeeze margins ahead of the Budget

Scott Knight, head of growth at BDO, said businesses were heading into the Budget with a single message of “no surprises”, adding that cost pressures continue to squeeze margins, hiring intentions are low and growth is starting to plateau. He said firms need certainty rather than grand interventions, and that concerns about further downside risks currently outweigh expectations of positive change.

The oil move was modest. Kyle Rodda, senior financial market analyst at Capital.com, described the US deal to allow more diesel exports as helping “optics” but piecemeal in effect, noting that Middle East refining remains heavily compromised and Ukrainian forces are striking Russian refineries. Brent had been down about 2% earlier in the morning before recovering to a 0.25% decline.

Also read: OECD Lifts UK 2026 Growth Forecast to 1.1%, Cuts Inflation to 3.1%

Hays chief executive Mark Dearnley said the decline in group net fees had eased to 3% in the quarter, driven by Temp & Contracting growth in several countries, with permanent activity mixed — strong in North America but fragile in Northern Europe. He said the company’s medium-term targets could be achieved through its own actions and pointed to progress on structural cost and productivity initiatives.

Debt campaign and IMF meetings

Also in Bangkok, the Fight Inequality Alliance called on finance ministers to consider debt cancellation for the Global South, arguing that “the era of austerity is over” and demanding an end to lending rules that require governments to pay creditors before hospitals, schools and food. Its general secretary, Jenny Ricks, said the IMF and World Bank are legacy institutions and that austerity programmes force cuts to public services; the alliance wants debt cancelled, austerity ended, a global tax on billionaires and a real say for poorer countries.

Healey said the consequences of conflict in the Middle East and Europe were hitting countries worldwide, raising prices at the pumps and making mortgages more expensive, and that Britain and its allies could face these challenges together. He said he would work with international partners to keep trade moving and support families and businesses, adding that his Budget would build on that approach with fiscal discipline.

Why it matters

The inflation reading lands days before a Budget, narrowing the room for giveaways and raising the cost of the government’s own borrowing. Politics is feeding directly into prices: the diesel deal and the declared pause in attacks on energy infrastructure moved crude only slightly, while the IFS warning suggests spending plans may need rewriting. Markets, meanwhile, treated the morning as a glass-half-full session, with banks leading the FTSE 100 higher despite the cost warnings from UK employers.

What to watch

Healey’s Budget later this month is the next test of whether the £35bn gap is addressed; Russia’s trade balance for August is due at 2pm BST, and the Nobel economics laureate is named from 10.45am BST. None of this constitutes financial advice, and the relevant markets are volatile and uncertain.

Written by

Benjamin

Benjamin Carter covers business, finance, and the stock market for StockPil, focusing on the trends and data that matter to everyday investors.

Sources: The Guardian, Npr