UK (Parliament Politics Magazine) – UK businesses are facing tough decisions, with more than half ready to increase prices due to a rise in costs and taxes, as business confidence has dropped.
According to a British Chambers of Commerce (BCC) survey of 4,800 companies, 55% plan to raise prices by April, marking a significant rise from 39% in a similar poll conducted in 2024.
Concerns about tax increases have grown since the October budget announced by Chancellor Rachel Reeves, which included £40bn in extra taxes, with £25bn coming from employer national insurance hikes.
Business groups have slammed the budget, but the Chancellor defended it saying it was necessary because of the economic challenges left by the previous Tory government and priority to invest in the NHS and other projects.
As reported by the BBC, two-thirds of firms are worried about tax hikes, following the budget revealing an increase in national insurance contributions (NICs) for employers in the coming April.
The BCC’s survey of more than 4,800 British companies, conducted between November 11 and December 9, showed that 91% were small and medium-sized enterprises. It revealed that 63% of firms were concerned about taxes, the highest since 2017, while business confidence fell, with only 49% expecting market growth, the lowest since the mini-budget in 2022.
The Treasury spokesperson defended the budget, stating that it ensures security, with over half of employers set to experience no increase or a reduction in their national insurance bills.
The spokesperson added, “We are bringing back political and financial stability, creating the conditions for economic growth through investment and reform.”
Keir Starmer’s Labour government has pledged to focus on investment to drive GDP growth but it’s under criticism over six months of disappointing economic progress.
The BBC’s director general stated, “The worrying reverberations of the budget are clear to see in our survey data. Business confidence has slumped in a pressure cooker of rising costs and taxes.”
She added, “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.”
Kevin McNamee, CEO of Denroy Group, a 250-employee plastics producer near Belfast, said that the rise in minimum wage and national insurance would hit the firm hard, costing “hundreds of thousands of pounds” and described it as “really significant.”
The release of disappointing economic data just before Christmas has raised worries about Britain’s economic strength.
Official data reveals the economy saw no growth from July and September, followed by a contraction in October.
Another KPMG’s latest report predicts the economy will grow this year, indicating an increase of 1.7%, up from 0.8% in 2024.
Markets expect the Bank of England will cut interest rates sharply this year, even though officials warn that inflation is still affecting the British economy.
The inflation rate, which measures the speed of price hikes, has dropped significantly from record levels in 2022, yet it saw a rise in both October and November.
How is the UK’s inflation rate measured?
To measure inflation, the ONS monitors the prices of various goods and services, such as food and fuel. Every year, the “basket of goods” is updated, adding popular products like air fryers and vinyl records in 2024, while eliminating things like hand sanitiser and rotisserie chicken.
The Consumer Prices Index (CPI) is the major inflation indicator, and for November 2024, it rose by 2.6%, up from 2.3% in October. This rise was mainly due to rising fuel and clothing prices.