The conflict in the Middle East has pushed energy prices sharply higher, but the implications for UK inflation will depend on the scale and duration of the shock as well as its propagation through firms' costs, prices, margins, and wages. This column uses new survey data from UK firms to provide early evidence on how business expectations are responding. Firms currently expect higher prices and lower margins to be the main margins of adjustment, especially among energy-intensive firms. Consistent with this, firms’ expectations for their own prices and costs have risen since the war began. Wage and employment impacts remain more muted but could evolve over time.
Nicholas Bloom, Philip Bunn, Paul Mizen, Gregory Thwaites and Ivan Yotzov
11 May 2026
VoxEU
https://cepr.org/voxeu/columns/how-uk-firms-are-responding-war-iran-early-evidence-decision-maker-panel
This work is published under POID and the CEP's Growth programme.
This publication comes under the following CEP theme: UK productivity and policy