UK businesses are bracing for price increases as the Budget raises costs

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The number of businesses planning to raise prices in the coming months has risen sharply as the UK Budget’s increase in tax and wage rates has caused confidence to “decline”, the British Chamber of Commerce has warned.

About 55 percent of companies say they plan to increase prices in the next three months, up from 39 percent in the third quarter, a tourism group survey of nearly 5,000 businesses found.

Expected price increases will fuel those concerns Budget measures that will stabilize UK inflation.

Concerns about tax conditions have also reached their highest level since 2017, the BCC has found, following chancellor Rachel Reeves’ decision to raise employers’ national insurance contributions by £25bn in the October Budget.

Shevaun Haviland, chief executive of the BCC said: “Business confidence has fallen due to rising cost and tax pressures. “Firms of all shapes and sizes are telling us that the expansion of national insurance is too dangerous.”

The government has come under heavy fire from business since the Budget, when bosses lamented higher payments for employers’ national insurance, as well as an increase in national incomes. Falling confidence has been matched by weak GDP numbers, according to the Bank of England estimates the economy failed to grow in the last quarter of 2024 despite a strong start to the year.

The share of companies planning to increase prices was equal to the last level seen at the beginning of 2023, when inflation still exceeded 10 percent.

Rising labor costs were the biggest reason given by companies planning to increase prices, with 75 percent of respondents citing this issue, up from 66 percent in the third quarter. . This issue was very important for the tourism sector, as well as transport and goods, it found.

Around 63 per cent of businesses said tax, including national insurance, was a concern after the Budget, the highest level since 2017. Meanwhile, confidence has fallen in the lowest position since the mini-mini of former prime minister Liz Truss. -Budget in autumn 2022.

Only 49 percent of respondents expect sales to increase in the next 12 months, down from 56 percent in the third quarter, with much lower confidence in sales and hospitality. Almost a quarter of companies say they have reduced their financial plans, up from 18 percent in the third quarter, although 56 percent say their plans are unchanged.

The Bank of England chose to keep borrowing costs steady at 4.75 percent at its last meeting in 2024, as the central bank continues to monitor the impact of the Budget on inflation prospects. Most ratepayers have expressed concern that recent increases in wages and prices have “increased the risk of persistent inflation”.

The BoE warned of “significant uncertainty about how the economy might respond to higher labor costs” as it warned that “many of the UK’s near-term economic indicators have weakened”.

The meeting followed the indicated points UK inflation rose to 2.6 percent in November, from 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 are small or medium-sized businesses.

“As we face rising costs, our survey paints a stark picture and shows that businesses have to make very tough decisions,” said David Bharier, head of research at BCC.

“Many are telling us that they expect prices to rise and investment to decrease and we expect this to lead to a low level of economic growth.”

The Treasury said: “We have delivered a one-off parliamentary Budget to wipe the slate clean and provide stability for businesses in desperate need of energy.”

It added: “This is just the start of our Transformation Plan, which will open up investment, find British buildings through design improvements, and use the latest Industrial Strategy to provide certainty and stability for businesses. which need to invest in the development and growth of the UK’s potential sectors.”