UK firms fear inflation hit, Bank of England warns as Trump’s latest speech sparks fresh market turmoil

UK firms are increasingly worried about inflation and supply chain disruption caused by Donald Trump’s war in Iran.

As the US president’s latest bellicose speech sent oil prices surging and set off stock market volatility, Bank of England figures showed inflation expectations have seen a sharp jump.

The Bank’s monthly survey of 2,000 finance chiefs showed firms expect inflation to hit 3.5 per cent in the coming year, up from 3 per cent the month before.

It was the highest since December 2023 and the biggest leap in expectations from one month to the next since September 2022. 

Firms now expect to raise prices over the next year by 3.7 per cent, up from 3.4 per cent.

In another gloomy finding, the survey suggested companies on average will cut employment by 0.3 per cent, reversing signs of improvement in the jobs market seen at the start of the year.

Separate data from the Office for National Statistics revealed a steep increase in concerns about disruption to supply chains, with the figures showing 37 per cent of companies had worries, up from 10 per cent from the end of last year.

And 21 per cent were worried about shipping disruption, three times as many as before.

Meanwhile, McBride, maker of household goods including Oven Pride, revealed plans for ‘temporary’ price hikes to cover increased costs from the war and said it was seeing the first signs of supply shortages.

The updates came as Trump on Wednesday dimmed hopes raised by his comments a day earlier of an end to the war.

It had been thought that the speech would signal an end to the conflict and outline plans to reopen the Strait of Hormuz, through which a fifth of the world’s oil and gas passes.

Instead, Trump vowed to bomb Iran back into the ‘Stone Ages’ and said the strait would open ‘naturally’ when war ends.

That sent oil on another wild ride. Having plummeted from $118 to as low as $98 on Wednesday, the price of a barrel of Brent crude rebounded yesterday to nearly $110.

Stock markets were also volatile, with London’s FTSE 100 falling 0.7 per cent before rebounding to close 0.7 per cent, or 71.5 points, higher at 10,436.29.

Oil giant Shell was up 2.9 per cent, or 100p, to 3543.5p and BP ahead by 2.6 per cent, or 15.2p, to 591.2p. 

Fallers included aircraft engine maker Rolls-Royce – down 1.5 per cent, or 18.5p, to 1188.5p; and British Airways owner International Airlines Group – down 0.7 per cent, or 2.6p, to 367.2p.

The Bank of England has warned that the Middle East war will put increased pressure on household finances as it drives up energy prices and mortgage rates.

It said the global environment was ‘materially more unpredictable’, raising the possibility of ‘large, frequent and potentially overlapping shocks and periods of intense volatility’.