More than half of private sector employers plan to raise prices to help offset tax increases, according to the British Chambers of Commerce.
The BCC’s survey of 5,000 companies found that worries about tax stood at levels not seen since 2017. Business confidence is as low now as it was shortly after the former prime minister Liz Truss’s mini-budget of autumn 2022.
Companies are concerned about the costs of higher employer national insurance contributions coupled with a lower threshold at which these will be paid, and a rise in the national living wage – all announced in Rachel Reeves’ first budget as Labour chancellor. The changes come into effect in April 2025.
The BCC found that 55% of companies were planning to raise prices in response to the tax rises, a move that would place upward pressure on inflation.
Budget response
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BCC director general Shevaun Haviland said: “The worrying reverberations of the budget are clear to see in our survey data. Businesses’ confidence has slumped in a pressure cooker of rising costs and taxes.
“Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging. Businesses are already cutting back on investment and say they will have to put up prices in the coming months.
“The government is rightly coming up with long-term strategies on industry, infrastructure and trade. But those plans won’t help businesses struggling now.
“Business stands ready to work in partnership to make the proposed employment rights legislation work for all, but the current plans will add further costs on firms.”
On the Employment Rights Bill, a separate survey by the Federation of Small Businesses has found that almost a third of small businesses plan to reduce headcount this year due to concerns about implementing the changes included in the Bill.
A Treasury spokesperson said: “We delivered a once in a parliament budget to wipe the slate clean and deliver the stability businesses so desperately need.
“We have ensured more than half of employers will either see a cut or no change in their national insurance bills, and by capping the rate of corporation tax at the lowest level in the G7, creating pension megafunds and establishing a National Wealth Fund, we are bringing back political and financial stability, creating the conditions for economic growth through investment and reform.
“This is just the start of our Plan for Change which will unlock investment, get Britain building via planning reform, and employ a modern Industrial Strategy to deliver the certainty and stability businesses need to invest in the UK’s growing and high potential sectors. This will make all parts of the country better off.“
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