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The number of businesses planning to raise prices in the coming months has risen sharply after UK budget increases in tax and wage costs caused “a drop in confidence”, the British Chambers of Commerce have warned.
About 55 percent of companies said they were planning to raise prices in the next three months, up from 39 percent in the third quarter, the lobby group’s survey of almost 5,000 businesses found.
The expected price rises will fuel concerns that fiscal measures will support resilient UK inflation.
Concerns over tax levels have also reached their highest level since 2017, the BCC found, following Chancellor Rachel Reeves’ decision to cut employers’ national insurance contributions by £25bn in the October Budget.
“Business confidence has fallen into a pressure cooker of rising costs and taxes,” said Shevaun Haviland, director general of the BCC. “Firms of all shapes and sizes are telling us that the rise in national insurance is particularly damaging.”
The Government has come under heavy criticism from business since the Budget, as bosses complain about higher Employers’ National Insurance payments as well as increases in the National Living Wage. Low confidence has coincided with weak GDP readings, as the Bank of England estimates the economy failed to grow in the final quarter of 2024 despite a strong start to the year.
The percentage of companies planning to raise prices was on par with last seen levels in early 2023, when official inflation was still more than 10 percent.
Rising labor costs were the biggest reason given by companies planning to raise prices, with 75 percent of respondents raising the issue, up from 66 percent in the third quarter. The issue was most relevant to the hospitality sector as well as transport and logistics, he revealed.
Some 63 per cent of businesses said tax, including national insurance, was a concern in the wake of the Budget, the highest level since 2017. Confidence, meanwhile, has fallen to its lowest level since the fallout from the miniature -Prime Minister Liz Truss. -Budget in autumn 2022.
Just 49 percent of respondents expect sales to increase over the next 12 months, down from 56 percent in the third quarter, with the lowest confidence in retail and hospitality. Nearly a quarter of companies say they have cut investment plans, down from 18 percent in the third quarter, although 56 percent say their plans are unchanged.
The Bank of England chose to hold borrowing costs steady at 4.75 percent at its final meeting in 2024 as the central bank continued to monitor the budget’s impact on inflation prospects. Most rate-setters expressed concern that recent increases in wages and prices had “increased the risk of continued inflation”.
The BoE warned of “considerable uncertainty about how the economy may respond to higher overall employment costs” after warning that “most indicators of short-term UK activity have declined”.
The meeting followed data that showed UK inflation rose to 2.6 percent in November, up from 2.3 percent in October.
The BCC survey was conducted between November 11 and December 9, gathering data from more than 4,800 businesses, more than 90 percent of which were small or medium-sized enterprises.
“In the face of rising costs, our survey paints a difficult picture and shows that businesses need to make some very tough decisions,” said David Bharier, head of research at the BCC.
“Many are telling us they expect prices to rise and investment to fall, and we expect that to lead to a low or no growth economic climate.”
The Treasury said: “We delivered a one-off budget to parliament to scrap the plan and provide the stability that businesses so desperately need.”
He added: “This is just the start of our Plan for Change, which will unlock investment, get Britain building through planning reform and use a modern Industrial Strategy to deliver the security and stability businesses need. invest in the UK on the rise and on the rise. potential sectors.”
