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A significant increase in businesses planning to raise prices in the upcoming months has been reported by the British Chambers of Commerce due to rises in tax and wage costs in the UK Budget. According to a survey of nearly 5,000 businesses by the lobby group, about 55% of companies are intending to implement price hikes in the next three months, up from 39% in the previous quarter.
The anticipated price increases are expected to contribute to concerns regarding inflation in the UK. The BCC also found that worries over tax levels have reached their highest point since 2017 following the chancellor’s decision to raise employers’ national insurance contributions by £25 billion in the October Budget.
“Businesses are facing a challenging environment with rising costs and taxes impacting their confidence,” said Shevaun Haviland, director-general of the BCC. “The national insurance increase is particularly detrimental according to firms of all sizes.”
Since the Budget announcement, the government has faced criticism from businesses due to the higher payments for employers’ national insurance and the national living wage. This subdued confidence coincides with weak GDP readings, as the Bank of England estimates that the economy did not grow in the final quarter of 2024 despite a strong start to the year.
Labor costs were cited as the primary reason for companies planning to raise prices, with 75% of respondents identifying this as a concern, up from 66% in the previous quarter. The hospitality sector, as well as transport and logistics, were most affected by this issue.
In addition, about 63% of businesses expressed concerns about taxes, including national insurance, following the Budget announcement. Confidence levels have dropped to their lowest point since 2022. Sales expectations for the next 12 months have also decreased, with a quarter of companies scaling back investment plans.
The Bank of England decided to maintain borrowing costs at 4.75% in its final meeting of 2024, citing concerns about the impact of the Budget on inflation. The majority of rate-setters expressed worries about the persistence of inflation due to recent increases in wages and prices.
UK inflation rose to 2.6% in November, up from 2.3% in October, according to recent data. The BCC survey, conducted between November and December, gathered responses from over 4,800 businesses, the majority of which were small or medium-sized enterprises.
“Our survey paints a challenging picture for businesses facing rising costs, leading to tough decisions such as price increases and reduced investment,” said David Bharier, head of research at the BCC. “This is likely to result in a low to no-growth economic environment.”
In response, the Treasury stated: “We have delivered a transformative Budget to provide stability and support for businesses.” The government’s Plan for Change aims to stimulate investment, promote construction through planning reform, and implement a modern Industrial Strategy to ensure certainty and stability for businesses investing in high-potential sectors in the UK.