Firms’ margins behaviour in response to energy shocks: Evidence from the UK

Ed Manuel, Sophie Piton and Ivan Yotzov

Economics Letters, 2024, vol. 235, issue C

Abstract: How have profits behaved in the current period of sustained inflation? In part, the answer depends on how ‘profits’ are defined. Some broad measures suggest increasing profits, but conflate market and non-market sector dynamics and omit important corporate costs. This paper constructs an alternative measure of corporate profits to capture UK firm earnings in excess of all production costs. This measure has been declining since the start of 2022, consistent with evidence from historical energy shocks. This decline has not been uniform across firms, however: firms with higher market power have been better able to protect their margins; others have experienced large declines.

Keywords: Energy shock; Inflation; Mark-ups; Profit margins (search for similar items in EconPapers)
JEL-codes: E25 E31 L11 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:235:y:2024:i:c:s0165176523005323

DOI: 10.1016/j.econlet.2023.111506

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