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The number of businesses planning to raise prices in the coming months has risen sharply, the British Chambers of Commerce and Industry has warned, as confidence is “sluggish” due to higher tax and labor costs in the UK budget.
About 55% of companies said they planned to raise prices in the next three months, up from 39% in the third quarter, according to a survey of about 5,000 companies conducted by the lobbying group.
The expected rise in prices will heighten concerns that budgetary measures will underpin Britain’s resilient inflation.
Concern over tax levels has also reached its highest level since 2017, the BCC has found, following Chancellor Rachel Reeves’ decision to increase national insurance contributions for employers by £25bn in the October budget.
“Business confidence is declining in the pressure cauldron of rising costs and taxes,” said Shebaun Haviland, executive director of the BCC. “Businesses of all shapes and sizes tell us that National Insurance price increases are particularly damaging.”
Since the budget, the government has come under intense criticism from business, with leaders bemoaning increases in employer national insurance contributions and the National Living Wage. The weakness in confidence coincides with weaker GDP, as the Bank of England expects economic growth to fail in the final quarter of 2024 despite a strong start to the year.
The proportion of companies planning to raise prices was the same as it was in early 2023, when official inflation was still above 10%.
Rising labor costs were the top reason cited by companies planning to raise prices, with 75% of respondents citing this issue, up from 66% in the third quarter. This problem turns out to be most critical not only for transportation and logistics, but also for the hospitality industry.
Around 63% of businesses said taxes, including National Insurance, were a concern following the proposed budget, the highest level since 2017. Meanwhile, confidence has fallen to its lowest level since the aftermath of former Prime Minister Liz Truss’ mini-speech. -Budgeted in fall 2022.
Just 49% of respondents expect sales to increase over the next 12 months, down from 56% in the third quarter, with the retail and hospitality sector having the lowest confidence. Nearly a quarter of companies said they had reduced their investment plans, up from 18% in the third quarter, while 56% said their plans remained unchanged.
The Bank of England chose to keep borrowing costs unchanged at 4.75% at its last meeting in 2024 as it continues to monitor the impact of the Budget on the inflation outlook. A majority of rate setters expressed concern that recent increases in wages and prices “increase the risk of sustained inflation.”
The BoE said that “most indicators of near-term economic activity in the UK are declining” and that there is “significant uncertainty about how the economy will respond to rising overall employment costs”. I warned you.
The meeting was held following data showing UK inflation rose to 2.6% in November from 2.3% in October.
The BCC survey was conducted from November 11th to December 9th and collected data from more than 4,800 businesses, more than 90% of which were small and medium-sized enterprises.
“In the face of rising costs, our research highlights a difficult situation and shows that businesses are having to make very difficult decisions,” said David Barrier, head of research at BCC. Ta.
“We expect many to push prices up and cut investment, leading to a low- or no-growth economic environment.”
“We delivered a one-time budget to Congress to clean up the slate and provide businesses with much-needed stability,” the Treasury said.
He added: “This is just the beginning of our transformation plan, which will unlock investment, build Britain through planning reform and adopt a modern industrial strategy to help businesses join Britain’s growth and high growth. It provides the certainty and stability needed to invest in a sector with great potential. ”
