British businesses are absorbing a sharp rise in input costs rather than passing them on to consumers, masking a hidden margin crisis behind steady headline inflation. Official data showed consumer price inflation held at 2.8pc in May, but producer input costs surged 8.7pc year-on-year, driven by a 71.8pc jump in crude oil prices, while factory gate prices rose only 4pc. Andrew Wishart, senior UK economist at Berenberg, said companies are accepting a big squeeze on margins because they fear raising prices would destroy sales volumes amid weak demand, decelerating pay growth, and high interest rates. The British Chambers of Commerce warned that firms remain under sustained cost pressure from higher energy and wage bills, with fragile business confidence. Economists cautioned that the margin squeeze could lead to hiring freezes or job losses, particularly in manufacturing, hospitality, and retail, keeping employment flat and wage growth slowing.