By David Milliken

LONDON Britain's highest inflation in four decades failed to boost company profits last year, with the exception of oil and gas extractors who benefited from a surge in energy prices, official figures showed on Tuesday.

The average net rate of return on capital employed by British companies not involved in oil and gas extraction was 9.5% in 2022, its lowest since 2011 and down from 10.0% in 2021, the Office for National Statistics said.

British consumer price inflation peaked at 11.1% in October 2022, its highest since 1981, and has been slower than expected to fall since then, dropping to 8.7% in April, the joint-highest rate among the world's seven largest advanced economies.

However, the Bank of England has said that there is little evidence so far that excessive company profits - sometimes known as 'greedflation' - are to blame for high inflation, in contrast to concerns from central bankers in the euro zone.

Looking at the fourth quarter of last year, when inflation was highest, net rates of return outside the oil and gas sector were 9.6%, up from 8.9% in the third quarter but below their level of 10.9% three years earlier before the COVID-19 pandemic.

"The big picture is that while greedflation has become today's hot topic, it does not seem that firms are expanding profit margins and raising returns," said Krishan Shah, an economist at the Resolution Foundation, a think tank which focuses on issues affecting low-paid workers.

Britain's surge in inflation initially reflected a leap in energy costs after Russia's invasion of Ukraine, compounding existing supply-chain bottlenecks created by the COVID-19 pandemic. Subsequently, rises in food prices and wages have added to inflation pressures.

Profit margins have been much higher for businesses that extract oil and gas from the North Sea, which reported an average net rate of return of 18.2% in 2022, the highest since 2011. Margins fell sharply to 12.7% in the final quarter of 2022, however, as oil and gas prices dropped.

"Net operating surplus in UK continental shelf companies is strongly related to oil and gas prices," the ONS said.

Britain's government has levied a 25% windfall tax on energy profits since May 2022, which it forecast in March would raise 25.9 billion pounds ($32.7 billion) between 2022 and 2028.

($1 = 0.7923 pounds)

(Reporting by David Milliken, editing by Andy Bruce)