More than half of private sector firms are planning price rises to help offset looming tax rises announced in the chancellor’s first budget, according to a business lobby group.
The British Chamber of Commerce (BCC) warned that business confidence was at its lowest level since the market crash that followed the Conservatives’ autumn 2022 mini-budget.
Its survey of nearly 5,000 businesses found concerns about taxes remained at levels not seen since 2017.
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Labor had fought an election focused on growth thanks to a better working relationship with business, but there was a widespread sense of shock when on October 30 budget put businesses on the hook for most of £40bn of tax rises.
The new government argued that the increases were necessary to secure investments in public services long overdue due to an alleged black hole in public finances inherited from the Conservatives.
But companies widely warned Higher costs, arising from measures such as higher employer National Insurance contributions and increases to the National Living Wage from April, would be passed on to customers and hit growth in wages, employment and investment.
At a time when the Bank of England is struggling to cut interest rates due to persistent cost pressures in the economy, there will be concern among policymakers about the threat posed by potential corporate price rises in the future.
The BCC survey found that 55% of companies planned to increase their own costs of sales.
Such a move would threaten further upward pressure on inflation, while weak business confidence would also do little to lift the economy out of the doldrums seen during the second half of 2024, when government warnings of a “tough” budget in the future were widely blamed for affecting confidence.
Currently, financial markets see only a 60% chance that the Bank will cut rates at the next meeting in a month.
BCC CEO Shevaun Haviland said: “The worrying implications of the budget can be clearly seen in our survey data. Business confidence has plummeted in a pressure cooker of rising costs and taxes.
“Businesses of all sizes tell us that the increase in social security is especially harmful. Companies are already reducing their investments and say they will have to raise prices in the coming months.
“The government is rightly putting forward long-term strategies on industry, infrastructure and trade. But those plans won’t help businesses struggling now.
“Businesses are willing to work in partnership to make the proposed workplace rights legislation work for everyone, but current plans will add more costs to businesses.”
The BCC said the government could help businesses absorb additional pressures in areas such as business rates reform and through infrastructure investments.
A Treasury spokesperson said in response: “We have delivered a single budget through parliament to wipe the slate clean and provide the stability businesses so desperately need.
“We have ensured that more than half of employers will see a cut or no change to their National Insurance bills, and by capping the corporation tax rate at the lowest level in the G7, creating mega pension funds and establishing a National Insurance Fund Wealth, we can are recovering political and financial stability, creating the conditions for economic growth through investment and reform.
“This is just the start of our Plan for Change, which will unlock investment, build Britain through planning reform and employ a modern industrial strategy to deliver the certainty and stability businesses need to invest in the UK’s high potential and growing sectors. This will improve the situation in all parts of the country.”
