London Daily

Focus on the big picture.
Saturday, Oct 17, 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
Russell Brand Trial Begins at Southwark Crown Court
UK Parliament to Debate Climate Risks and Council Tax Following Public Petitions
Department for Transport Demands Safety Audits Following Regional Rail Disruptions
House of Lords Scrutinizes Amendments to Armed Forces Bill
Devolved Administrations in Scotland and Wales Criticize Post-Brexit Funding Framework
Prime Minister Andy Burnham Defends Middle East Military Support Under Parliamentary Scrutiny
NHS Leaders Warn of Severe Pressure on Hospitals from Winter Virus Outbreaks
Retailers and Business Groups Lobby Chancellor for Relief from Rising Employment Taxes
City of London Taskforce Urges Radical Reform to Prevent UK From Becoming "Incubator Nation"
Bank of England Officials Signal Potential November Interest Rate Hike
Institute for Fiscal Studies Warns of £35 Billion Funding Gap in Upcoming Autumn Budget
IMF Upgrades UK Growth Forecast to 1.3% for 2026
Former UUP leader Jeffrey Donaldson sentenced to 15 years in prison for historical child sex offences
UK ministers adopt independent commission blueprint to fast-track AI in the NHS
Labour leadership orders local councillors to end power-sharing deals with Green Party
UK government considers regulatory intervention in proposed Sky and ITV merger
Environment Agency declares severe drought across six English regions as reservoirs hit critical lows
NHS England issues new guidance prohibiting transgender women from female-only wards
Norwegian teenager sentenced to 20 years for part of Iran-backed assassination plot in Britain
UK government threatens complete visa ban on Eritrea over refusal to accept deportees
UK Treasury lobbies UBS to move global headquarters to London amid banking sector tax threats
MI5 Warns of Growing Russian Sabotage and Espionage Threats Across Britain
UK Prime Minister Andy Burnham Plans Brussels Talks to Renegotiate Post-Brexit Trade Deal
MI5 Warns of Rising Russian and Iranian Sabotage Threats to British Military Facilities
UK Prime Minister Andy Burnham Pledges Closer EU Ties as MI5 Reveals Russian Brexit Interference
UK Orders Security Review Following Reported Killing of Former Politician Ann Widdecombe
UK Prime Minister Andy Burnham Meets German Chancellor Merz to Strengthen European Security Ties
Nearly 100,000 NHS Patients Treated in Hospital Corridors as England Braces for Winter Pressures
UK Government Rejects US-Russia Diesel Agreement and Reaffirms Sanctions Against Moscow
UK and Germany Agree to Deepen Security and Economic Cooperation Following Berlin Talks
British Prime Minister Burnham Pledges Closer EU Ties During Visit to Germany
UK Announces New Sanctions on 17 Russia-Linked Entities During Foreign Secretary's Ukraine Visit
UK and Germany Finalize Kensington Treaty to Strengthen Defense and Technology Cooperation
Britain Maintains Diplomatic Mission in East Jerusalem Despite Israeli Closure Deadline
English Councils Push Government to Rethink Proposed Funding Cuts
Scottish Homebuilding Falls to Lowest Level in 11 Years
BBC Chief Matt Brittin Defends Restructuring as Staff Challenge Job Cuts
UK Finance Warns High Energy Costs and Bond Yields Are Complicating Fiscal Outlook
UK Adopts All 44 Recommendations on Regulating AI in Healthcare
Chancellor John Healey Prepares Autumn Budget as Borrowing Costs Strain Public Finances
UK Investigators See Strong Indications of Iranian Link After RAF Fairford Security Operation
Laura Trott Pledges Tighter Controls on Political Activism in UK Classrooms
Welsh Ministers Launch Long-Term Review of North Wales and Anglesey Crossings
Welsh Government Orders 18-Month Study of Road Solutions Around Newport
Reform UK MP Sarah Pochin Faces Scrutiny Over £800,000 Second Home Purchase
British Households Grow More Concerned About Fuel and Energy Prices
NHS Leaders Warn of Rising Winter Pressure on Emergency Departments
Kemi Badenoch Proposes £2.3 Billion Employer National Insurance Cut for Young Workers
Middle East Conflict Could Erase UK Fiscal Headroom, Economists Warn
Manchester City Found Guilty of Multiple Premier League Financial Rule Breaches
×