Press Story

  • The role of ‘excess profits’ by dominant companies in exacerbating inflation is revealed in new report
  • Driven by a small number of firms, business profits rose by 30 per cent among UK listed firms and more elsewhere post-pandemic, far outpacing price rises
  • Call for global approach to taxing excess profits and tackle market power of dominant firms, to reduce economic costs from such inefficient functioning of markets

Many large international companies were able to comfortably increase prices during the global inflation period, protecting or even driving up their profit margins, while ordinary families saw their real incomes wither away, according to a new report from IPPR and Common Wealth.

Energy companies like ExxonMobil and Shell, mining firms such as Glencore and Rio Tinto, and food and commodities giants like Kraft Heinz, Archer-Daniels-Midland and Bunge all saw their profits far outpace inflation in the aftermath of Russia's invasion of Ukraine.

Because energy and food prices feed so significantly into costs across all sectors of the wider economy, this exacerbated the initial price shock – contributing to inflation peaking higher and lasting longer than had there been less market power, the report argues. Firms in other sectors such as tech, telecommunications and finance also saw high profit increases.

Such companies have been able to protect their profit margins or even increase them – setting prices higher than are socially and economically beneficial, and so generating ‘excess profits’ - through a combination of high market power and global market dynamics, the report says.

It builds on work by Isabella Weber, assistant professor at the University of Massachusetts, who has argued that profits in ‘systemic sectors’ can have an outsized impact on inflation across the wider economy. IPPR and Common Wealth researchers undertook the first multi-country analysis of corporate profits to explore this, analysing financial statements of 1,350 companies listed on the stock markets of the UK, US, Germany, Brazil and South Africa.

They discovered nominal profits averaged at least 30 per cent higher at the end of 2022 (Q4), compared to the end of 2019 (pre-pandemic).

Companies that were amongst those increasing their profits most after the pandemic include (all converted to £):

  • ExxonMobil, whose average annualised profits rose from £15 billion to £53billion
  • Shell, whose average annualised profits rose from £16 billion to £44 billion
  • Glencore, whose average annualised profits rose from £1.9 billion to £14.8 billion
  • Archer-Daniels-Midland, whose average annualised profits rose from £1.4
  • Kraft Heinz, whose annualised profits rose from £265 million to £ 1.8 billion

A rise in nominal profits need not imply that firms have raised their profit margins, the report says; for many it is the result of passing on their higher costs to consumers, maintaining the same degree of profitability (as a percentage of nominal sales) - while squeezed wage earners across the economy took losses.

But there is evidence that some stock market-listed firms not only protected their margins but also increased them, not only passing inflation on but further amplifying it.

The market power held by a small number of companies can be a significant factor in profitability, the research found. In the UK, 90 per cent of nominal profit increases during this period occurred in only 11 per cent of publicly listed firms. Many other companies experienced a reduction in profits.

Researchers found that if companies accepted a hit to their profit margins – similar to that endured by wage earners – and stopped trying to fully pass on their higher costs to others - then ‘pass the parcel’ inflation would decrease. Such inflation accounted for about three-quarters of UK inflation at the end of 2022, according to Bank of England research.

Common Wealth and IPPR urge that - alongside interest rate setting by central banks - policymakers deploy a much broader range of policy tools to dampen inflation caused by external shocks and prevent a repetition of such behaviour by powerful companies. These should include:

  • A new international approach to taxing excess profits, which could generate $100 billion a year of global tax revenue. This could form part of pro-investment tax reforms, to reduce inefficient behaviour by dominant corporations and encourage productive investment instead
  • A new direction for competition policy, to stop overly powerful companies from taking advantage of economic emergencies and to help stabilise markets.
  • More interventions such as price caps and excess profits taxes to help stabilise markets during economic emergencies. Such fiscal measures have been applied by about half of European economies in the last two years, and were found to be effective in helping to lower inflation - as recently highlighted by the IMF’s chief economist.

The report also urges central banks and other macroeconomic institutions to develop a better understanding of the costs of ‘excess profits’ to the economy – including malfunctioning markets and poorer outcomes for households and smaller businesses.

Carsten Jung, senior economist at IPPR, said:

“Our research finds that markets aren’t working efficiently, enabling large companies to make profits that likely amplified inflation. This has made the cost of living crisis worse for most people, and for many smaller firms across the economy.

“The original inflation spike was driven by global supply chains gumming up post-pandemic, and then by the energy price shock following the Ukraine invasion. Now economists considering the knock-on effects of ‘home made’ inflation have been focussing too much on the labour market. In fact, most wage earners have taken real losses while many businesses protected their profit margins or even raised them. We should be scrutinising the role profits have played in amplifying inflation.

“Tackling excess profits also matters for our economic efficiency. If external shocks are made worse by business behaviour then new policy tools are needed to tackle this. Competition policy could be more proactive and excess profits could be taxed to align incentives. Most European countries – including the UK – have already started doing this. We should now think about how to expand our policy toolkit further to be better prepared for the next economic emergency.”

Chris Hayes, chief economist of Common Wealth, said:

"Inflationary shocks cannot be avoided, but they need not persist so long. Our analysis of companies suggests many large firms, beyond just the commodities sector, are using their power to preserve their profit margins. This pushes the shocks downstream to workers, consumers and labour-intensive industries that are less able to absorb them.

“This is not only unfair but has destabilised the economy and undermined growth. We need a new set of targeted and strategic macroeconomic policies to encourage companies to behave differently and bring down inflation, both now and in the future.”



Carsten Jung and Chris Hayes, the report’s authors, are available for interview

Mathew Lawrence, Common Wealth founder and director, and Carys Roberts, IPPR executive director, are also available for interview


David Wastell, Director of News and Communications: 07921 403651

Liam Evans, Senior Digital and Media Officer: 07419 365334


  • The joint Common Wealth and IPPR paper, Inflation, profits and market power – towards a new research and policy agenda, by Carsten Jung and Chris Hayes, will be published at 0001 on Thursday December 7. After publication it will be available for download at:
  • Advance copies of the report are available under embargo on request.
  • FIGURE: Profits were 28 to 74 per cent higher at the end of 2022 compared to the end of 2019
    Total annualised nominal pre-tax profits, publicly listed non-financial companies, end 2019 = 100, four quarter average Source: CW/IPPR analysis of Refinitiv 2023
  • FIGURE: Figure 3.5: The largest four food manufacturers together saw a £16.5 billion increase in profits compared to pre-pandemic
    Nominal pre tax profits (all converted into £ billion for comparability), pre-pandemic compared to post-pandemic average (2016–19 vs Q3 2021–Q4 2022) Source: CW/IPPR analysis of Refinitiv 2023
  • Terminology:
    ‘Profits’ refers to nominal pre-tax profits.
    ‘Profitability’ – used interchangeably with ‘profit margins’ – refers to the percentage of revenues that goes to profits.
  • Methodology: To assess overall changes in profit level, researchers analysed reported firm-level data, calculating annualised average nominal profits, comparing pre and post pandemic. They compared annualised averages over the four years to December 2019 (pre-pandemic) with their equivalents July 2021 to December 2022 (post-pandemic). They looked at stock market-listed firms in five countries:
    - USA: S&P 500 (500 firms)
    - UK: FSTE All Share (572 firms)
    - Germany: DAX large caps, mid caps and small caps (159 firms)
    - Brazil: BOVESPA (82 firms)
    - South Africa: FTSE JSE (Johannesburg Stock Exchange) (41 firms)
    Firms that did not report for all quarters of the studied period were excluded.
    To assess changes in profits by the specific firms, researchers compared total quarterly profits for 2022 with those for 2019.
  • Common Wealth is a think tank that designs ownership models for a democratic and sustainable economy. Working at all levels from community and grassroots groups to national and international policymakers, we combine rigorous analysis and research with bold ideas for a society that works for everyone.
  • IPPR (the Institute for Public Policy Research) is an independent charity working towards a fairer, greener, and more prosperous society. We are researchers, communicators, and policy experts creating tangible progressive change, and turning bold ideas into common sense realities. Working across the UK, IPPR, IPPR North, and IPPR Scotland are deeply connected to the people of our nations and regions, and the issues our communities face. We have helped shape national conversations and progressive policy change for more than 30 years. From making the early case for the minimum wage and tackling regional inequality, to proposing a windfall tax on energy companies, IPPR’s research and policy work has put forward practical solutions for the crises facing society.