UK businesses scale back pay plans despite higher inflation - Lloyds

LONDON, Jan 31 (Reuters) - British businesses are scaling back plans for pay rises and hiring, but almost half intend to increase the prices they charge customers as they seek to manage rapidly rising costs, a survey showed on Monday.

The figures from a monthly Lloyds Bank survey will give mixed signals to the Bank of England on the persistence of inflation pressures - and the extent to which they will hamper growth - as it considers a widely expected rate rise this week.

A record 49% of the 1,200 businesses surveyed between Jan. 4 and Jan. 18 said they expected to raise prices, up from 45% in December.

But the proportion expecting to raise pay by 2% - well below the current 5.4% rate of inflation - fell to a five-month low of 41% from 48% in December.

The number planning pay rises of 3% fell to 21% from 26% and those share of those planning 4% pay rises dropped to 12% from 14%.

"Businesses remain cautious about the pandemic and are facing into challenges from rising cost pressures although many are raising their prices in response," Lloyds Bank economist Hann-Ju Ho said.

Overall confidence slipped from December and hiring intentions were the lowest since August - although 46% of firms still plan to increase their headcount over the next 12 months.

A monthly survey from the Confederation of British Industry on Sunday showed that private-sector growth in the three months to January was the weakest since April, reflecting a big hit to many firms from a wave of Omicron cases in December and January.

(Reporting by David Milliken, Editing by Alistair Smout)

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