London Daily

Focus on the big picture.
Saturday, Aug 15, 2026

'Greedflation' explored: Are businesses making inflation worse through excessive profits?

'Greedflation' explored: Are businesses making inflation worse through excessive profits?

Sky's economics & data editor examines whether there is a case to answer on the accusation that UK firms are ripping us off and making the cost of living crisis worse in the process.

It's an ugly word for an ugly phenomenon. 'Greedflation' is the new buzzword in economics.

The thesis is quite simple. While a certain chunk of the inflation we're currently living through can undoubtedly be put down to higher energy prices and a chunk put down to higher wages as employers pass those costs onto their workers, there's a sizeable chunk that comes back to something else: profits.

Some economists argue that businesses are using the cost of living crisis as an opportunity to generate excessive profits.

This isn't just an idle theory. Economists at the European Central Bank (ECB) actually have some statistical evidence to back it up.

You can only learn so much by breaking down the consumer price index, the traditional measure of rising prices (inflation, let's not forget, is simply the rate at which the prices of the average goods and services we spend most of our money on change each year).

That might tell you how much is down to food price inflation but it can't give you a sense of how much of that given increase in food prices is benefiting workers versus their employers.

But there is another way of skinning the numbers. You can look instead at another measure of prices, something called the gross domestic product deflator.

Looking at prices this way, via another dataset, allows you to work out how much of the pricing pressure we're currently seeing can be put down to profits and how much down to wages (or indeed other factors like taxes).

And the ECB chart is pretty stark:


The key thing to look at are the red slices of the bar. That's showing you how much of the rise in prices in the past few years can be attributed to profits.

And it's pretty clear that profits have been a considerable chunk of the recent increases in prices. Indeed, in the most recent couple of quarters of data, for late 2022, profits accounted for more of the rise in prices than wages (the green slices).

Now, some would argue that this isn't necessarily profiteering. It's simply businesses doing what they always do when there's lots of demand for goods and raising their prices.

Without that response, the market as we know it simply wouldn't function. Nonetheless, some say it underlines that a good chunk of the price squeeze is due to the greed of businesses.

So that's the eurozone. How about the UK?

Well in the past few days we at Sky News have done a similar exercise to the ECB, using our own GDP deflator data to create our own 'greedflation' chart. And here's what it shows:


A few obvious things leap out. The first is that enormous spike in prices and then the fall during COVID and its aftermath.

As far as I can tell this was in large part a function of the fact that wider measures of the economy were all over the shop.

It's quite hard to know how much to read into anything going on during this yo-yo as for all we know it could be a statistical aberration (perhaps worthy of some further study).

But now look at the red slices. While the slice is certainly pretty big in the very latest quarter for which we have data (the final quarter of 2022), even in that quarter profits were still slightly smaller as a component part of the GDP deflator than wages.

And look a little further back and actually the contribution of profits to prices was far, far smaller than in the eurozone.

In other words, if this is our best statistical measure of 'greedflation' - and it seems to be - then we have considerably less of it here in the UK than there is on the other side of the Channel.

Tempting as it is to blame businesses for what we're suffering through, there's not an enormous amount of evidence from these figures that they are the main culprit. Actually, taxes (in other words the government) contributed much more to inflation in 2021 and into 2022 than business profits.

Now, with Britain facing double-digit inflation, a miserable cost of living crisis and rising interest rates, the above might not be of much consolation. And it's quite possible the numbers may well shift - note that these figures are a little slow to be updated, so we don't know the picture as of the early part of this year.

Even so, it's a reminder that the data sometimes tells a subtly different story to the mainstream narrative.

Newsletter

Related Articles

0:00
0:00
Close
UK and Finland Discuss European Defence and Continued Support for Ukraine
Nigel Farage Wins Clacton By-Election to Return to the House of Commons
UK Government Deploys Military to Help Fight Wildfires and Bans Disposable Barbecues
UK Records Hottest Day of the Year as Fifth Summer Heatwave Peaks in Southern England
UK Condemns Houthi Actions and Warns of Red Sea Threat to Global Trade
UK and Solomon Islands Open Wildlife Photography Exhibition in Honiara
UK Small Businesses Face Continued Cash Flow and Tax Pressures
Greatham Marsh Restoration Restores Tidal Wetland in Hartlepool After More Than 200 Years
UK Health Regulator Urges University Students to Check Meningitis and Measles Vaccination Status
Mining Remediation Authority Completes Major Ground Stabilization Works in Scottish Community
UK Food Crime Investigators Seize 33 Tonnes of Illegal Food in Multi-Agency Operation
Technical Qualification Uptake Hits Record High as Advanced Mathematics Results Improve
UK Summer Temperatures on Course to Challenge Long-Standing Records, Met Office Says
UK Farmers Bring Forward Cereal Harvests as Drought Threatens Yields
Wildfires Surge Across England and Wales as Fire Chiefs Report Record July
UK Nurses Warn of Heat Risks as Hospital Staff Struggle With Extreme Temperatures
Southern Water Seeks Drought Order for Hampshire and Isle of Wight Amid Water Shortages
UK Heatwave Pushes West London Temperature to 38.1 Degrees as Health Alerts Continue
UK Economy Grows 0.4% in Second Quarter Despite Global Uncertainty
China’s Kimi Launches AI-Focused Credit Card With Agricultural Bank of China and American Express
UK Residents Gather to Watch Rare Partial Solar Eclipse
Reform UK Deputy Leader Richard Tice Faces Criticism Over Legal Threat Against Guardian Journalist
Michael Forsyth Elected Speaker of the House of Lords
Cambridge Researchers Launch £20 Million Human Organoid Drug Testing Programme
Heathrow Loses European Passenger Traffic Lead to Istanbul Airport
Households Near New UK Electricity Pylons to Receive £250 Annual Energy Bill Discount
UK Government Estimates Zero-Hours Contract Ban Could Cost Employers Up to £3 Billion a Year
Robert Jenrick Leaves Conservatives for Reform UK in Major Parliamentary Defection
UK Police Chiefs Urge Government to Block Early Release of Andrew Harper Killers
UK Government Holds Emergency Cobra Meeting as Drought and Heatwave Raise Wildfire Risks
Former Labour Adviser Arrested on Suspicion of Spying for China Held Privileged Access as Top Party Donor
Turkish Parliament Passes Landmark Bill Granting Conditional Amnesty to Disarmed PKK Members
Donald Trump Warns FIFA Against Ousting Gianni Infantino Amid Revolt by Global Football Leaders
Jeff Bezos Joins Investor Group Closing In on $6 Billion Liverpool FC Stake
Police Conduct Cross-Border Raids Against Northern England Drug Network
Nicola Sturgeon Protested at Edinburgh Festival Fringe Event
Major UK Retail Chain Enters Administration With One Hundred Fifty-Four Stores Set to Close
Heathrow Renews Call for Runway Expansion After Losing Europe’s Busiest Airport Ranking
Government Condemns One Million Pound Thames Water Executive Bonus Amid Drought
NHS England Says More Than One Hundred Thousand Hepatitis C Patients Have Been Cured
UK Foreign Secretary Ed Miliband Calls for End to West Bank Settler Violence
UK Prepares for Deepest Partial Solar Eclipse Since Nineteen Ninety-Nine
UK Heatwave Triggers Amber Health Alerts as Economic Losses Reach Four Point Four Billion Pounds
UK Offers Electricity Bill Discounts to Communities Hosting New Power Infrastructure
Bank of England Expected to Hold Interest Rates at Three Point Seven Five Percent
UK Government Moves to Ban Subscription Traps and Misleading Retail Discounts
Andy Burnham Gives Councils New Powers to Block Betting and Vape Shops
UK Councils to Receive Sweeping Planning Powers to Ban New Vape and Betting Shops
Nicola Sturgeon Says She Has No Contact With Estranged Husband After SNP Embezzlement Case
Police Arrest Two Men After Aberdeenshire Defense Technology Office Break-In
×