Business morale in the UK has fallen to its lowest level in two years after the tax hike, a Reuters survey shows
David Milliken
LONDON (Reuters) – British businesses are the weakest since former prime minister Liz Truss’ September 2022 “mini budget”, following unexpectedly large tax increases in the new Labor government’s Oct. 30 budget, a business survey showed.
The British Chambers of Commerce, which conducts the largest private sector survey of UK businesses, say businesses are the least satisfied with taxation since they started asking about it in 2017, while confidence in sales over the next 12 months is at its lowest since the end of 2022.
“The worrying echo of the budget is clear in our survey data. Business confidence has taken a nosedive in the face of rising costs and taxes,” said BCC chief executive Shevaun Haviland.
Chancellor of the Exchequer Rachel Reeves announced a 40 billion pound ($50 billion) tax increase on October 30, the largest in any budget since 1993. The bulk of this will come through higher social security contributions 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 mainly to lower employment, higher prices or lower profits or investment.
The BCC said 55% of companies plan to raise prices, up from 39% in the previous quarter, while 24% intend to cut investment, up from 18% previously. It plans to release employment intentions survey data on January 14.
The poor mood is reflected in other surveys of companies by S&P Global, the Institute of Directors and the Confederation of British Industry.
The UK economy grew solidly in the first half of 2024 as it recovered from a shallow recession at the end of 2023, before stagnating in the third quarter of last year.
The Bank of England has forecast zero growth for the fourth quarter of 2024 and growth of 1.5% in 2025.
The BCC survey of 4,800 companies, mostly with fewer than 250 employees, was conducted from November 11 to December 9.
($1 = £0.8057)
