A report from the Institute for Public Policy Research (IPPR) and Common Wealth suggests that the "excess profits" of large international companies may have contributed to inflation by passing on higher costs to consumers.
The researchers analysed the financial statements of 1,350 firms listed on stock markets in the UK, US, Germany, Brazil, and South Africa. They found that after Russia's invasion of Ukraine, certain UK-listed firms like Shell, Glencore, Vodafone, and Barclays experienced profits that outpaced inflation, while real incomes of ordinary families decreased.
According to the report released on Thursday, the increased profits of companies in various sectors, including energy, technology, telecommunications, and finance, may have contributed to the inflationary pressure. The researchers argue that as energy and food prices significantly influence costs across different sectors of the economy, the excess profits exacerbated the initial price shock, leading to higher and more prolonged inflation.
This analysis raises concerns about the impact of large companies' market power on inflation, particularly during times of geopolitical and economic uncertainty.