More than half of UK companies are preparing to increase prices over the next three months as they struggle with rising costs and taxes, according to a report from the British Chambers of Commerce (BCC). A survey of nearly 5,000 firms revealed that business confidence has dropped to its lowest level in two years, with nearly two-thirds expressing concerns about tax increases announced in the recent Budget, including a rise in National Insurance Contributions (NICs) for employers from April.
A Treasury spokesperson defended the Budget, claiming it provides stability for businesses, with more than half of employers seeing either no change or a reduction in their NICs. However, the planned price hikes risk fueling inflation, which, although lower than the record highs of 2022, rose in both October and November. The BCC survey found 55% of firms plan to increase prices in the next quarter, up from 39% previously.
BCC Director General Shevaun Haviland explained that businesses face tough choices, including raising prices, absorbing costs into already tight margins, or cutting recruitment and staff expenses. A separate report from S&P Global revealed that December saw job cuts in the services sector at the fastest rate in nearly four years, with one in four survey respondents reporting a decline in payroll numbers.
While official data showed zero economic growth from July to September and a contraction in October, a report from KPMG forecasts a stronger growth rate of 1.7% for this year, up from 0.8% in 2024. However, it warned that the increased growth could lead to higher and more persistent inflation as businesses pass on tax-related cost increases.
Business leaders have expressed mixed reactions to the Budget. Kevin McNamee, CEO of Denroy Group, said the combined impact of higher NICs and the increased National Living Wage would cost his company “hundreds of thousands of pounds” and likely necessitate price increases. He criticized the Budget for failing to incentivize investment and growth. Meanwhile, Dame Irene Hays, director of Hays Travel, noted that her firm’s bookings are up 22% this year and said careful management has helped them navigate cost pressures over the years.
The Budget included a rise in employers’ NICs from 13.8% to 15% and an increase in the National Living Wage from £11.44 to £12.21 per hour, effective from April. Small and medium-sized enterprises, which made up 91% of the BCC survey, are particularly affected, with 63% worried about taxes—the highest level since 2017. Only 49% of businesses expect sales growth in the coming year, the lowest level since the aftermath of the 2022 mini-budget.
A Treasury spokesperson emphasized that the Budget aims to create stability and growth, ensuring more than half of employers see reduced or unchanged NIC bills. However, the BCC warned that rising costs and taxes are creating immense pressure, causing a significant drop in business confidence. Businesses now face tough decisions to balance cost pressures with pricing, staffing, and investment strategies.
