Prime Highlights:
Confidence among UK businesses has dropped to its lowest level since the 2022 “mini-budget” crisis, as per a new survey by the British Chambers of Commerce (BCC).
63% of businesses cited rising tax burdens as a major concern, up from 48% in the previous quarter, with many anticipating price hikes to cover increased labor costs.
Over half (55%) of businesses plan to raise prices in the next three months, primarily due to higher National Insurance contributions.
Key Background:
Confidence among UK businesses has plunged to its lowest level since the 2022 “mini-budget” crisis, according to a new survey by the British Chambers of Commerce (BCC). The trade group revealed a significant decline in sentiment following the government’s budget in October 2024, marking the most significant drop since the Labour government took office. The budget included a rise in National Insurance (NI) contributions, which has raised concerns across a variety of sectors.
The survey found that 63% of businesses are worried about the impact of tax increases, up from 48% in the previous quarter. Many companies, particularly in hospitality, manufacturing, construction, and healthcare, reported struggles with covering higher costs, with over half (55%) expecting price increases in the next three months. The main driver behind these price hikes is anticipated higher labor costs. Additionally, fewer businesses (49%) expect an increase in turnover in the coming year, down from 56% in the previous survey.
The BCC’s findings suggest that businesses are scaling back investment plans due to the rising costs and uncertainties, with a general feeling of pessimism in the market. Concerns about inflation and interest rates remain steady, further compounding the situation.
While the Labour Party argues that the tax increases are necessary to address public sector deficits, the BCC believes that such measures could hinder economic growth. The BCC’s head, Shevaun Haviland, emphasized the need for immediate action to support businesses despite the tax rise, calling for strategies in trade, infrastructure, and industrial planning to stimulate economic activity.
The UK’s economic stagnation, coupled with rising borrowing costs and inflationary pressures, has put further strain on business confidence. Although some economists argue that the current bond yield rise is less dramatic than the spike following the 2022 mini-budget, the outlook remains cautious as firms prepare for a challenging year ahead.