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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 “dent” confidence, the British Chambers of Commerce has warned.
About 55 percent of companies said they plan to increase prices in the next three months, compared to 39 percent in the third quarter, the lobby group's survey of nearly 5,000 companies found.
The expected price rise will increase concerns about this budget These measures will support flexible inflation in the UK.
The British Chambers of Commerce found that concerns about tax levels also reached their highest level since 2017, following Chancellor Rachel Reeves' decision to raise employers' National Insurance contributions by £25 billion in the October Budget.
“Business confidence has declined due to rising costs and taxes,” said Shevon Haviland, director general of the BCC. “Businesses of all shapes and sizes tell us that increasing National Insurance is particularly harmful.”
The government has come under Heavy fire from business since the Budget, with employers bemoaning higher Employers' National Insurance payouts, as well as increases in the National Living Wage. Weak confidence coincided with weak GDP readings, as did the Bank of England Estimates The economy failed to grow in the last quarter of 2024 despite a strong start to the year.
The proportion of companies planning to increase prices was equal to levels last seen at the start of 2023, when official inflation was still more than 10 percent.
High labor costs were the top reason given by companies planning to increase prices, with 75 percent of respondents raising the issue, compared to 66 percent in the third quarter. It found that the problem was most significant for the hospitality sector, as well as transportation and logistics.
Some 63% of businesses said tax, including National Insurance, was a concern in the wake of the Budget, the highest level since 2017. Meanwhile, confidence fell to its lowest level since the aftermath of former Prime Minister Liz Truss's government. -Budget in fall 2022.
Only 49 percent of survey respondents expect sales to increase over the next 12 months, down from 56 percent in the third quarter, with confidence levels lowest in the retail and hospitality sectors. Nearly a quarter of companies say they have reduced their investment plans, up from 18 percent in the third quarter, although 56 percent say their plans have not changed.
The Bank of England chose to keep borrowing costs steady at 4.75 per cent at its final meeting of 2024, as the central bank continued to monitor the budget's impact on inflation expectations. A majority of interest rate setters expressed concern that recent increases in wages and prices “increased the risk of persistent inflation.”
The Bank of England warned that “there is significant uncertainty about how the economy will respond to rising overall employment costs” and that “most indicators of activity in the UK in the near term have declined”.
The meeting came in the wake of the data that showed The UK inflation rate rose to 2.6 percent in November, from 2.3% in October.
The BCC survey was conducted from November 11 to December 9, collecting data from more than 4,800 companies, more than 90 percent of which were small or medium-sized businesses.
“In the face of rising costs, our survey paints a difficult picture and shows that companies have to make some very difficult decisions,” said David Bharer, head of research at BCC.
“Many tell us they expect prices to rise and investment to cut back, and we expect this to lead to a low or no growth economic climate.”
The Treasury said: “We have once presented a Budget in Parliament to wipe the slate clean and bring much-needed stability to businesses.”
He added: “This is just the beginning of our plan for change, which will unlock investment, push Britain to build through planning reform, and employ a modern industrial strategy to provide the certainty and stability businesses need to invest in a growing, high-growth UK.” potential sectors.”
