London Daily

Focus on the big picture.
Sunday, Aug 23, 2026

Bank of England doubles down on inflation gamble to prevent greater damage ahead

Bank of England doubles down on inflation gamble to prevent greater damage ahead

Sky's Paul Kelso speaks to a business owner facing a massive, damaging increase to their gas bills as the governor of the Bank of England explains why it is inflicting more pain on millions of borrowers to help control a price problem mostly outside its control.

How does it feel running an energy intensive business in the age of soaring prices?

"It's like a train coming down the tracks and you know you can't avoid it," says Matthew Greene.

He's the managing director of Ercon Powder Coating, a second-generation family firm in Bilston in the West Midlands, one of hundreds of manufacturers that form the backbone of British industry.

Matthew took over the business from his father in 2016, since when he has had to steer it through Brexit, the pandemic and now an energy crisis that may be the hardest of all. His two sons work with him.

Matthew Greene, the boss of Ercon Powder Coating, fears its gas bills will rise six-fold


Powder-coating is the process of applying a smooth, dry finish to metal surfaces, used for everything from park railings and shelving units to hi-fi appliances and designer chair legs.

It's cleaner, quicker and smoother than paint but it is an energy intensive business, requiring large gas-fired convection ovens to bake on the powder at temperatures north of 200C, and the locomotive Matthew can see in the distance is his gas bill.

"You're talking about going from £50,000 or £60,000 to up to £300,000, so where does that come from? We can make small improvements here and there, save a thousand pounds a month here and there, but such a huge rise does threaten the viability of the business.

"We have 25 people employed in the powder coating division, we have been doing this since 1983 and we have had highs and lows with various recessions, but this is something different, we've never experienced anything like this when such a catastrophic cost is going to hit the company.

"The gas is going to cost more than employing people, more than renting the building, more than employing, it's going to have a huge impact."

The wholesale gas price increase Matthew faces isn't just fuelling his ovens.

The Bank of England says it's driving inflation to a peak of 13.3% in October, a date linked to the increase in the domestic price cap to an estimated £3,500, and will keep inflation above 10% until this time next year, prompting the largest fall in living standards since the 1960s.


Given a 15-month recession looms and this is largely imported inflation, driven by global demand and the war in Ukraine and beyond the control of the Bank, why has it decided to increase interest rates by the largest amount since 1995, a move that could add £650 to average tracker mortgage repayments?

Governor Andrew Bailey told me they're acting now to prevent the impact of energy inflation being baked into domestic prices when prices fall.

"The reason we're doing it is because if we don't get inflation under control, if we don't bring it down from where I'm afraid it's got to go because of this huge energy shock that we're having, then the damage and the distress will be even greater," he said.

"I recognise how difficult this will be and how significant this will be for the cost of living, but if we don't address this now the consequences will be worse and the result will be even higher interest rates in future."

Mr Bailey says there is already evidence of domestic inflation taking root in Britain's tight labour market, where there are more vacancies than job-seekers, forcing wages up by a predicted 6% this year.

He repeated his warning that inflation-chasing pay settlements risks embedding inflation, a message unlikely to find supporters among public and private sector workers facing below-inflation settlements.

Speaking in the midst of the Conservative leadership race, he resisted all invitations to comment on the candidates' extravagant tax-cutting promises, or suggestions from Liz Truss that the Bank's mandate should be changed.

He did however defend its judgement today, and its role in future.

"We think this is undoubtedly the right thing to do, but we will be back in six weeks' time, for the next monetary policy meeting, and we'll go through all the evidence again.

"What I would emphasise is that independence is an absolutely key part of the economic system of this country, and in other countries. It's an important part and never more than now, this is the biggest test of our system in the quarter of a century this has existed for."

The next few months will test that faith. Matthew Green, thousands of business owners like him, and the rest of us, will hope Mr Bailey and his colleagues have got it right.

Newsletter

Related Articles

0:00
0:00
Close
UK Opens National Artificial Intelligence Safety Testing Facility
UK Government Finalizes Plans to Bring Remaining Regional Rail Services Into Public Ownership
Environment Agency Imposes Record Penalties on Water Companies Over Illegal Sewage Discharges
Great British Energy Announces Offshore Wind Partnership in North Sea
UK Government Tightens Planning Rules to Accelerate Housing Development
NHS Launches Digital Overhaul to Cut Elective Care Waiting Lists
Bank of England Signals Interest Rates May Stay Higher for Longer as Inflation Pressures Persist
The rise and fall of Hui Ka Yan, China’s richest man
Woke: Britain Considers Plain Packaging for Cigars as Specialist Shops Warn of Industry Collapse
Britain's Public-Service Productivity Remains Below 2019 as £80 Billion Output Gap Fuels WFH Debate
Mandelson Epstein Case in Jeopardy as U.S. Files Stay Out of Reach
Prince Harry and Six Others Ordered to Pay £9.5 Million After High Court Defeat
Bank of England Holds Interest Rate at 3.75% as Inflation and Energy Risks Persist
UK AI Security Tests Find Autonomous Agent Attempting Malicious Code Injection
UK Economy Grows 0.4% in Second Quarter Amid Global Pressures
UK Joins European Allies in Condemning Israeli Settlement Plans in West Bank E1 Area
Multiple People Killed in A66 Collision Near Middlesbrough Involving Police Vehicle
UK Government Holds First National Day for Victims and Survivors of Terrorism
UK Met Office Warns of Severe Autumn Storms as Strong El Niño Follows Historic Drought
Petrol Bombs Set Luxury Cars Alight Outside Birmingham Wedding as Police Hunt Three Men
Bitcoin Surges Toward $80,000 as Short Squeeze and ETF Inflows Ignite Crypto Rally
Prince Harry and Co-Claimants Ordered to Pay £9.5 Million Toward Daily Mail Publisher’s Legal Costs
Prince Harry and Meghan Markle Reportedly Plan Return to Britain With Their Children
UK Court Ruling Threatens Deportation Plans for Potential Trafficking Victims to Albania
Kemi Badenoch Presses UK Government for Decisions on Rosebank and Jackdaw Oil Fields
UK Foreign Affairs Committee Chair Calls for Ban on Goods from Occupied West Bank
Andy Burnham Government to Place Civil Servants Directly in English Mayoral Offices
Met Office Warns Major El Niño Could Bring Stormier, Wetter Autumn to UK
UK Economy Gains Unexpected Momentum Ahead of Andy Burnham Government’s First Budget
Twenty-Nine US States Take Meta to Trial Over Alleged Child Addiction on Instagram and Facebook
Former Scottish National Party Executive Peter Murrell Jailed for Five Years Over £400,000 Embezzlement
Moderna and Merck's Personalized Cancer Vaccine Succeeds in Historic Late-Stage Melanoma Trial
Prince Harry and Meghan to Move Back to Britain With Their Children
England and Wales Have Fewer Than 1,800 Prison Places Left for Men
Royal Navy to Accelerate DragonFire Laser Deployment Against Growing Drone Threat
Northern Ireland Approves Five Hundred Million Pound Belfast Harbour Expansion
Great British Railways Takes Full Control of Avanti West Coast as Rail Nationalisation Reaches Final Stage
UK AI Safety Institute Calls for Mandatory Security Audits of Advanced AI Models
Scotland Secures Three Billion Pounds for Floating Offshore Wind Hub in Aberdeen
Government Overrides Local Councils to Approve Green Belt Housing Across Southern England
UK and EU Move Toward Mutual Recognition of Food Standards to Ease Cross-Channel Trade
Government Plans Multibillion-Pound Private Healthcare Expansion to Cut NHS Surgical Backlogs
Bank of England Signals Faster Rate Cuts as Inflation Falls Below the Two Percent Target
Suspected People Smuggler Arrested After Investigation Identified Him
Children's Doctors Warn That Vaping Can Lead Young People to Smoking
Hundreds of Thousands of Students Receive GCSE and Vocational Results Across England, Wales and Northern Ireland
Here Is What Can Never Happen in Your Country: Taiwan Is Giving Money to All Its People Because It Collected Too Much Tax
UK Inflation Rises to 2.9% as Energy Bills Jump
UK Issues New Conduct Guide for Asylum Seekers on Consent and Respect
Moderna Shares Surge After Positive Personalized Skin Cancer Trial Results
×