The Bank of England has published a staff working paper that develops a framework for estimating firms’ responses to economic shocks in near real time. Applying high-frequency administrative and survey microdata to the 2021-23 UK energy price shock, the research finds that energy-intensive firms passed on higher costs, increased cash reserves and shifted toward homeworking, with little evidence of aggregate employment losses or firm exits. Responses varied by firm size. Small firms drove price pass-through, with an estimated response roughly twice that of large firms, while large firms accounted for statistically significant capital adjustment. The real-time estimates were consistent across survey instruments and with the UK’s structural business survey released two years later. Applied to the energy shock triggered by the 2026 US-Israeli strikes on Iran, the framework produced estimates within two months showing that materials prices, output prices and stock levels were the main adjustment channels for energy-intensive firms.
2026-08-28Bank of England
Bank of England publishes research finding energy-intensive UK firms raised prices and cash buffers with little employment impact
A Bank of England staff working paper finds that energy-intensive UK firms responded to the 2021-23 energy shock mainly by raising prices, building cash reserves and increasing homeworking, with little aggregate employment or exit impact. Small firms drove price pass-through, while large firms adjusted capital. The framework also produced real-time estimates for the 2026 energy shock within two months.