London Daily

Focus on the big picture.
Sunday, Jun 01, 2025

'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
Hegseth Warns of Potential Chinese Military Action Against Taiwan
OPEC+ Agrees to Increase Oil Output for Third Consecutive Month
Jamie Dimon Warns U.S. Bond Market Faces Pressure from Rising Debt
Turkey Detains Istanbul Officials Amid Anti-Corruption Crackdown
Taylor Swift Gains Ownership of Her First Six Albums
Bangkok Ranked World's Top City for Remote Work in 2025
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
White House Press Secretary Criticizes Harvard Funding, Advocates for Vocational Training
France to Implement Nationwide Smoking Ban in Outdoor Spaces Frequented by Children
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
U.S. Justice Department Reduces American Bar Association's Role in Judicial Nominations
U.S. Department of Energy Unveils 'Doudna' Supercomputer to Advance AI Research
U.S. SEC Dismisses Lawsuit Against Binance Amid Regulatory Shift
Alcohol Industry Faces Increased Scrutiny Amid Health Concerns
Italy Faces Population Decline Amid Youth Emigration
U.S. Goods Imports Plunge Nearly 20% Amid Tariff Disruptions
OpenAI Faces Competition from Cheaper AI Rivals
Foreign Tax Provision in U.S. Budget Bill Alarms Investors
Trump Accuses China of Violating Trade Agreement
Gerry Adams Wins Libel Case Against BBC
Russia Accuses Serbia of Supplying Arms to Ukraine
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
Chinese Woman Dies After Being Forced to Visit Bank Despite Critical Illness
President Trump Grants Full Pardons to Reality TV Stars Todd and Julie Chrisley
Texas Enacts App Store Accountability Act Mandating Age Verification
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Vatican Calls for Sustainable Tourism in 2025 Message
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
Trump Threatens 25% Tariff on iPhones Amid Dispute with Apple CEO
Putin's Helicopter Reportedly Targeted by Ukrainian Drones
Liverpool Car Ramming Incident Leaves Multiple Injured
Australia Faces Immigration Debate Following Labor Party Victory
Iranian Revolutionary Guard Founder Warns Against Trusting Regime in Nuclear Talks
Macron Dismisses Viral Video of Wife's Gesture as Playful Banter
Cleveland Clinic Study Questions Effectiveness of Recent Flu Vaccine
Netanyahu Accuses Starmer of Siding with Hamas
Junior Doctors Threaten Strike Over 4% Pay Offer
×