By David Milliken
LONDON (Reuters) – British businesses are the gloomiest since former Prime Minister Liz Truss' “mini-budget” in September 2022, a business survey showed, after unexpectedly large tax rises in the new Labor government's budget on October 30.
The British Chambers of Commerce, which conducts the largest private sector survey of British businesses, said businesses were the least happy about taxes since they started asking about it in 2017, while confidence in sales over the next 12 months was the lowest since late 2022.
“The worrying echoes of the Budget are clear in our survey data. Business confidence in the pressure cooker has fallen due to rising costs and taxes,” said BCC Director General Shevon Haviland.
Finance Minister Rachel Reeves announced tax increases worth £40 billion ($50 billion) on October 30, the largest increase in any budget since 1993. The bulk of these increases will come through higher social security charges paid by employers.
While the Bank of England estimates that higher public spending will temporarily boost growth next year, the big question for policymakers is whether tax increases lead mostly to lower employment rates, higher prices, or lower profits or investment.
The British Chamber of Commerce said that 55% of companies plan to raise prices, up from 39% in the previous quarter, while 24% intend to reduce investment, up from 18% previously. It plans to release survey data on hiring intentions on January 14.
This pessimistic mood reflects other surveys of companies conducted by Standard & Poor's Global, the Institute of Directors and the Confederation of British Industry.
The British economy grew strongly in the first half of 2024 as it recovered from a shallow recession in late 2023, before suffering a recession in the third quarter of last year.
The Bank of England forecasts zero growth for the fourth quarter of 2024 and a 1.5% expansion in 2025.
The BCC survey was conducted among 4,800 businesses, most with fewer than 250 employees, from November 11 to December 9.
($1 = 0.8057 pounds)
