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The number of firms planning to raise prices in the coming months has surged as UK Budget increases in tax and wage costs caused a “fall” in confidence, the British Chamber of Commerce has warned.
About 55 percent of companies said they plan to raise prices in the next three months, up from 39 percent in the third quarter, the lobby group’s survey of nearly 5,000 businesses found.
The expected rise in prices will raise concerns Budget measures will support resilient UK inflation.
Concerns about tax levels have also reached their highest level since 2017, the BCC found, following Chancellor Rachel Reeves’ decision to cut employers’ National Insurance contributions by £25 billion in the October Budget.
“Business confidence has fallen in the pressure cooker of rising costs and taxes,” said Shevaun Haviland, chief executive of the BCC. “Companies of all shapes and sizes are telling us that increasing National Insurance is particularly damaging.”
The government has fallen heavy fire from business than the budget, as bosses complain about higher employers’ national insurance payments, as well as an increase in the minimum living wage. The dampened confidence coincided with weak GDP readings, such as the Bank of England assessments the economy failed to grow in the last quarter of 2024 despite a strong start to the year.
The share of companies planning to raise prices was equal to levels last seen in early 2023, when official inflation was still above 10 percent.
Rising labor costs are the biggest reason for companies planning to raise prices, with 75 percent of respondents citing the issue, up from 66 percent in the third quarter. The problem is most significant for the catering sector, as well as transport and logistics, it was determined.
Some 63 per cent of businesses said taxes, including National Insurance, were a cause for concern after the Budget, the highest level since 2017. Confidence, meanwhile, fell to its lowest level in the wake of former Prime Minister Liz Truss’s miniature Autumn 2022 Budget.
Only 49 percent of respondents expect sales to increase over the next 12 months, down from 56 percent in the third quarter, with the lowest confidence in retail and hospitality. Nearly a quarter of companies say they have cut investment plans, up from 18 percent in the third quarter, although 56 percent said their plans remained unchanged.
The Bank of England decided to keep borrowing costs steady at 4.75 percent at its last meeting in 2024, as the central bank continued to monitor the impact of the budget on the outlook for inflation. Most tariff-setters expressed concern that recent wage and price increases “raised the risk of persistent inflation.”
The BoE warned of “significant uncertainty about how the economy might respond to higher aggregate employment costs” as it warned that “most indicators of UK short-term activity have declined”.
The meeting followed the data that showed Inflation in Great Britain rose to 2.6 percent in November, with 2.3 percent in October.
The BCC survey was conducted between November 11 and December 9, collecting data from more than 4,800 businesses, more than 90 percent of which were small or medium-sized businesses.
“In the face of rising costs, our survey paints a grim picture and shows that companies have to make some very tough decisions,” said David Bharier, head of research at the BCC.
“Many are telling us they expect prices to rise and investment to fall, and we expect that to lead to little or no economic climate.”
The Treasury said: “We have brought in a once-in-a-lifetime budget to wipe everything out and provide the stability that businesses so desperately need.”
It added: “This is just the start of our Plan for Change, which will unlock investment, get Britain up and running through planning reform and deploy a modern industrial strategy to provide the certainty and stability businesses need to invest in the UK’s growing and high-traffic industry.” . potential sectors.”
