UK firms are considering increasing prices to offset higher tax payments as business confidence dropped to its lowest level since the market-shaking “mini-budget” crisis of fall 2022, as per a survey by the British Chambers of Commerce.
The trade group noted a significant decline in sentiment in its largest survey since the Labour government’s debut budget last October, which raised the National Insurance (NI) contributions for many employers.
According to the BCC, 63% of businesses expressed concerns about taxes in the survey, up from 48% in the previous quarter. More than half (55%) anticipate price hikes in the next three months, mainly due to increased labor costs.
The survey revealed a decrease in the percentage of companies expecting turnover growth in the next twelve months, dropping to 49% from 56%. Worries about inflation and interest rates remained relatively stable.
The BCC highlighted worries from firms in sectors like hospitality, manufacturing, construction, and healthcare about covering additional costs and potential reductions in investments.
The Labour Party, in power since July, defends the tax increases as necessary to address a significant deficit in public finances from the previous administration. The party has also stated that over half of UK employers will either see a reduction or no change in their national insurance bills due to exemptions.
The BCC survey aligns with previous reports of declining confidence among British companies post-budget, with senior business leaders criticizing the budget for increasing uncertainty and potentially hindering economic growth — a key focus of Finance Minister Rachel Reeves’ agenda.
The UK is currently experiencing a period of stagnation, with no growth recorded in the third quarter.
Shevaun Haviland, head of the BCC, emphasized the need for prompt action to counter the tax increase and drive economic growth, urging the government to implement strategies like industrial plans, trade policies, and infrastructure development.
Following the October 2024 budget, UK borrowing costs have risen, surpassing the levels seen after the “mini-budget” of September 2022, where then-Prime Minister Liz Truss announced extensive, uncosted tax reductions.
Economists note that the recent increase in bond yields differs from the 2022 surge, with less dramatic movements and changes in the macroeconomic environment, including a moderation in inflation.
