UK Firms Expect 3.3% Inflation in BoE Survey, Current Account Gap Widens to 3.0% of GDP
UK firms raised their expectations for consumer price inflation a year ahead to 3.3% from 3.1%, the Bank of England’s Decision Maker Panel showed on Friday.
In The Edge’s reading, the survey takes some of the comfort out of slowing pay: firms expect to pass more of their costs on, and their one-year inflation view now sits 0.5 points above their three-year view, against 0.3 points in September. Price plans hardened as well: 68% of firms now expect to raise prices because of the energy shock, up from 57% in September.
On the same day the Office for National Statistics’ Pink Book put the 2025 current account deficit at £91.6 billion, or 3.0% of GDP, the second largest in the G7.
The rise in expectations comes before the Monetary Policy Committee’s decision on Bank Rate, now 3.75%, due on 5 November.
The panel surveys chief financial officers at small, medium and large UK businesses, and its results are weighted to represent the business population. The October round ran from 2 to 16 October. It drew 1,945 responses, and the headline measures are averages of the three months to October.
Firms expect 3.3% inflation and plan more price rises
Year-ahead CPI expectations rose 0.2 points, while the three-year measure stayed at 2.8%. The one-year figure is still 0.2 points below official CPI inflation of 3.5% in September, which was set out earlier.
The prices firms charge point the same way. Realised growth in their own prices rose to 3.8%, from 3.7%. They expect the same 3.8% over the next year, so they see output price inflation flat rather than easing.
The panel covers firms across the whole economy, not only those selling to consumers, so own prices and the consumer price index are different measures.
Since April the survey has asked how firms expect the energy shock to affect them over the next 12 months. In October, 68% expected to raise prices, 11 points more than in September. That is also 4 points above April.
The share expecting to cut prices fell to 3%, from 7%. Net of those cutting, the balance of firms planning increases rose to 65 points, from 50 in September.
Margins are absorbing part of the shock as well. In October, 71% of firms expected lower profit margins, 3 points more than in April and close to the September reading.
Decision Maker Panel, three-month averages (in %)
| Measure | October | September |
|---|---|---|
| CPI expected, 1 year | 3.3 | 3.1 |
| CPI expected, 3 years | 2.8 | 2.8 |
| Own prices, past year | 3.8 | 3.7 |
| Own prices, next year | 3.8 | 3.7 |
| Wages, past year | 3.9 | 4.0 |
| Wages, next year | 3.4 | 3.4 |
| Employment, past year | -0.5 | -0.2 |
| Employment, next year | 0.2 | 0.2 |
Weighted survey results for the three months to each month shown; realised measures are annual growth over the past year.
Expected response to the energy shock (in % of firms)
| Response | October | September |
|---|---|---|
| Raise prices | 68 | 57 |
| Lower prices | 3 | 7 |
| Lower margins | 71 | 70 |
Expected effects over the next 12 months. In the April survey, 64% of firms expected to raise prices and 68% expected lower margins.
Pay growth slows as employment shrinks
Annual wage growth slipped to 3.9% from 4.0%. Firms expect 3.4% over the next year, which implies a slowdown of 0.5 points, the Bank said.
Expected pay growth is 0.1 point above the firms’ own year-ahead inflation expectation of 3.3%.
Employment fell 0.5% over the past year on the panel’s measure, a deeper drop than the 0.2% reported in September. Firms still expect headcount to grow 0.2% over the next year, unchanged on the month.
That leaves a gap of 0.7 points between the hiring firms plan and the job losses they report now. Responses to the survey fell to 1,945, from 1,993 in September.
The Pink Book puts the 2025 deficit at £91.6 billion
The current account deficit widened by £7.3 billion in 2025. The 2024 deficit is now put at £84.3 billion, or 2.9% of GDP.
The UK has run a current account deficit every year since 1984. Only the US had a larger deficit in the G7 last year, at 3.8% of GDP, while Japan ran the largest surplus, at 4.8%.
Goods drove the deterioration. The trade deficit, including precious metals, widened to £39.5 billion, or 1.3% of GDP. In 2024 it was £21.1 billion.
The goods deficit grew by £36.3 billion, to £234.3 billion. The deficit on unspecified goods, a category dominated by precious metals, widened by £17.8 billion, or 49.0% of that increase.
Goods imports rose by £31.5 billion, to £624.7 billion. Goods exports fell by £4.7 billion, to £390.4 billion. Lower oil prices cut the oil deficit by £3.4 billion, to £15.0 billion.
Services moved the other way. The services surplus widened to £194.8 billion, or 6.4% of GDP. Services exports rose 7.3%, to £522.8 billion. The largest increases came in financial services, then telecommunications, computer and information services, other business services and travel services.
Even so, the services surplus covered 83.1% of the goods deficit in 2025, down from 89.3% in 2024.
Investment income helped. The primary income deficit narrowed by £10.2 billion, to £35.3 billion. Net earnings on direct investment rose to £40.1 billion, from £25.2 billion.
Against that, the portfolio income deficit widened to £53.4 billion. It included £8.9 billion more paid out on gilts.
Rates of return fell on both sides as interest rates came down. They eased to 3.4% on UK assets abroad and to 3.7% on foreign investment in the UK.
UK current account (in £ billions)
| Measure | 2025 | 2024 |
|---|---|---|
| Current account | -91.6 | -84.3 |
| Trade | -39.5 | -21.1 |
| Goods | -234.3 | -198.0 |
| Services | 194.8 | 176.9 |
| Primary income | -35.3 | -45.5 |
Includes precious metals; 2024 figures are revised. The secondary income deficit was 0.6% of GDP in both years.
Portfolio inflows finance the gap
The financial account recorded a net inflow of £85.6 billion, or 2.8% of GDP. Financial inflows were £574.3 billion and outflows £488.7 billion.
In net terms, portfolio investment brought in £83.9 billion, little changed from 2024, and direct investment £21.2 billion. Other investment, which covers deposits and loans, showed a small net outflow of £0.9 billion. Deposits moved heavily both ways. Foreign residents placed £360.3 billion in foreign currency deposits with UK banks, against £252.6 billion in 2024. UK residents raised their currency and deposits abroad to £212.0 billion, from £50.6 billion.
Equity buying rose as gilt buying fell. Foreign investors bought a net £34.7 billion of UK equity and fund shares, after net sales of £5.7 billion in 2024. Net foreign purchases of gilts fell to £28.5 billion, from an unusually high £102.0 billion.
The net international investment liability rose to £60.7 billion, or 2.0% of GDP, at the end of 2025. It was £40.9 billion a year earlier.
Portfolio investment drove the change, moving to a net liability of £84.8 billion from a net asset of £22.1 billion. Direct investment partly offset it, cutting its net liability to £114.7 billion from £271.4 billion.
What to watch:
5 November: the Bank of England’s Monetary Policy Committee announces its decision on Bank Rate, with the November Monetary Policy Report.
18 November, 07:00 GMT: ONS consumer price inflation for October.
4 December: the next Decision Maker Panel release.
Method: survey figures are averages of the three months to each month shown, from the October 2026 panel; balance of payments figures are from the Pink Book 2026, released on 30 October 2026 at 09:30 GMT, and include precious metals; differences, shares and point gaps not attributed to a source are The Edge’s calculations.
Primary sources: Bank of England, Monthly Decision Maker Panel data, October 2026, 30 October 2026; Office for National Statistics, UK Balance of Payments, The Pink Book: 2026, 30 October 2026.
Sources: Bank of England, Office for National Statistics, The Edge.
