The survey, which polled 2,254 CFOs across small, medium and large UK businesses, found firms expected their output price inflation to fall in the next 12 months by 1.5 percentage points from the 4.4% reported for Q4 2023.

Wage growth remained sticky though, with expected growth at 5.2% for the next year, while realised wage growth in the last quarter of 2023 was 6.9%.

UK executives call on Bank of England to cut rates amid sinking confidence in economy – reports

Uncertainty among UK businesses also fell marginally in December, with 51% of firms reporting a high or very high level of uncertainty, down from 53% in November.

According to James Smith, developed markets economist at ING, wage growth still remains “too high for the BoE’s liking” and argued services inflation is likely to remain “sticky” at around 6% for the next quarter, before experiencing a noticeable fall in the summer.

Fed minutes warn rates could remain high ‘for some time’

However, Smith noted the survey data will add to investor speculation of potential rate cuts this year.

He said: “Markets are pricing the first rate cut from the Bank of England in May, which feels a bit early. We also think when rate cuts do begin – potentially in August – they will be a little more gradual than markets are currently pricing. We expect 100 basis points of cuts this year, though much depends on how quickly services inflation and wage growth turn a corner.”

The DMP survey follows research by the Institute of Directors yesterday (3 January), which found a drop in confidence in the UK economy by business executives, and called on the BoE to start cutting rates soon in  a bid to boost growth.