UK firms plan to raise prices to cover higher tax payments as business confidence hits lowest level since market wobble “mini budget” crisis. in autumn 2022, according to research by the British Chamber of Commerce.
The trade group said sentiment had “declined significantly” in it the biggest survey from the Labor government the first budget last Octoberwhich included an increase in the amount many employers pay into National Insurance (NI), payroll tax.
The BCC said 63% of businesses cited tax as an issue in the survey, up from 48% in the third quarter. More than half (55%) said they expect prices to rise in the next three months, primarily due to higher labor costs.
The percentage of companies that said they expected an increase in turnover in the next twelve months fell to 49%, from 56%. Concern about inflation and interest rates remained approximately stable.
The BCC cited companies in the hospitality, manufacturing, construction and health sectors that expressed concerns about how they would cover the extra costs and said they were likely to cut back on investment.
“We recognize what [Reeves] said she had to raise taxes to fill her black hole, but what we need to see her do now is mitigate that. What are we going to do to stimulate the economy?” Shevaun Haviland, head of the BCC, told CNBC’s “Squawk Box Europe” on Monday.
“Businesses are going to have to put up with this tax increase, but what we want to see is action, and they need to act fast. It’s important that they put strategies in place, an industrial strategy, a trade strategy, an infrastructure plan, for later this year, but we need to see action now.”
The UK’s borrowing costs rose after the October 2024 budget, surpassing the levels they jumped to after the September 2022 “mini budget” under then-prime minister Liz Truss announce across-the-board tax cuts without spending.
However, economists say the recent rise in bond yields is not equivalent to the increase seen in 2022 as the moves have been significantly less dramatic and the macro backdrop — including a reduction in inflation — has changed.
