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The number of businesses planning to raise prices in the coming months has jumped sharply as UK Budget increases in tax and wage costs have caused confidence to “fall”, the British Chambers of Commerce has warned.
About 55 percent of companies say they plan to raise prices in the next three months, up from 39 percent in the third quarter, the lobby group's survey of about 5,000 businesses found.
Expected price increases will cause concerns in that regard Budget measures will support inflation in the UK.
Concerns about tax levels are also at their highest level since 2017, the BCC has found, following chancellor Rachel Reeves' decision to raise employers' national insurance contributions by £25bn in the October Budget.
“Business confidence has fallen in the face 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 too risky.”
The government has gone under heavy fire from business since the Budget, as bosses complain about higher employers' national insurance premiums, and increases in the national living wage. Lowered confidence has coincided with weaker GDP readings, according to the Bank of England estimate the economy failed to grow in the last quarter of 2024 despite a strong start to the year.
The proportion of companies planning to raise prices was on par with the last levels seen in early 2023, when official inflation was still above 10 percent.
Rising labor costs were the biggest reason given by companies planning to raise prices, with 75 percent of respondents citing the issue, up from 66 percent in the third quarter. This issue was particularly important in the hospitality sector, as well as in transport and logistics, it found.
Around 63 per cent of businesses said tax, including national insurance, was a concern after the Budget, the highest level since 2017. Confidence, meanwhile, has fallen to the lowest level since the afternoon of the previous prime minister Liz Truss. – Budget for autumn 2022.
49 percent of respondents expect sales to increase in the next 12 months, down from 56 percent in the third quarter, with low confidence in retail and hospitality. Nearly a quarter of companies say they have scaled back investment plans, down from 18 percent in the third quarter, although 56 percent said their plans are unchanged.
The Bank of England chose to keep borrowing costs steady at 4.75 percent at its last meeting in 2024, as the central bank continued to monitor the impact of the Budget on inflation expectations. Many raters have expressed concern that recent increases in wages and prices have “increased the risk of inflationary pressures”.
The BoE warned of “significant uncertainty about how the economy is likely to respond to higher employment costs” as it warned that “most of the UK's near-term indicators have declined”.
The meeting followed the data showing Inflation in the UK rose to 2.6 percent in November, from 2.3 percent in October.
The BCC survey was conducted between November 11 and December 9, collecting data from more than 4,800 businesses, more than 90 percent of which were small or medium-sized businesses.
“Faced with rising costs, our research paints a grim picture and shows that businesses need to make tough decisions,” said David Bharier, head of research at the BCC.
“Many are telling us they expect to raise prices and reduce investment and we expect this to lead to an economic slowdown to no growth.”
The Treasurer said: “We have brought the Budget to parliament to wipe the slate clean and provide much-needed stability to businesses.”
It added: “This is just the beginning of our Transformation Plan, which will open up investment, acquire a British structure through strategic planning, and use a modern Business Strategy to provide certainty and stability for businesses that want to invest in the growth and prosperity of the UK.” possible components.”