More than half of companies plan to raise prices in the next three months due to rising costs and taxes, according to the British Chambers of Commerce (BCC).
The BCC’s survey of nearly 5,000 firms revealed business confidence has “slumped” to its lowest level in two years. Nearly two-thirds of respondents expressed concerns about higher taxes, following the Budget announcement of a rise in National Insurance Contributions (NICs) from April.
A Treasury spokesperson argued the Budget provides stability for businesses, noting that over half of employers would see either a reduction or no change in their NIC bills.
However, raising prices risks fueling inflation, a major concern amid the ongoing cost-of-living crisis. While inflation has dropped sharply from 2022 highs, it increased in both October and November.
The survey, conducted after the Budget, showed that 55% of firms expected to raise prices in the next three months, up from 39% in the previous quarter.
BCC Director General Shevaun Haviland told the BBC: “With rising costs, businesses have limited options. They can raise prices, take a hit on margins, or reduce recruitment and staff costs—it’s extremely tough.”
A separate survey by S&P Global showed the services sector cut jobs in December at the fastest pace in nearly four years, citing subdued demand and higher employment costs. Tim Moore, Economics Director at S&P Global, noted, “Nearly one in four respondents reported a decline in payroll numbers.”
The UK economy remains under scrutiny following recent disappointing growth figures. Official data showed zero growth between July and September and a contraction in October, a setback for the Labour government, which had prioritized economic growth.
KPMG forecasts GDP growth to reach 1.7% in 2025, up from 0.8% in 2024, as consumer spending increases due to stronger pay growth and lower interest rates. However, KPMG warned this growth could lead to more persistent inflation as businesses pass on tax rises to consumers.
Businesses have raised concerns about Budget measures, such as the NIC increase and higher National Living Wage, potentially leading to job cuts and price hikes. Kevin McNamee, CEO of Denroy Group, estimated these changes would cost his company “hundreds of thousands of pounds.” He acknowledged that price increases and workforce reductions were likely.
In contrast, Dame Irene Hays, owner of Hays Travel, reported no decline in confidence in the travel sector. Bookings at her firm, which employs 3,500 people, are up 22% this year. While she acknowledged rising costs, she emphasized careful management, saying, “We’ve weathered many changes over 45 years.”
The Budget, delivered by Chancellor Rachel Reeves, announced an increase in employers’ NICs from 13.8% to 15% and a rise in the National Living Wage from £11.44 to £12.21 per hour, both effective from April.
The BCC’s survey, conducted between 11 November and 9 December, included responses from over 4,800 businesses, 91% of which were small and medium-sized enterprises (SMEs).
Ms. Haviland concluded: “Our data highlights the worrying impact of rising costs and taxes on business confidence. Many firms are operating in a pressure cooker environment.”
A Treasury spokesperson responded: “The Budget delivers stability for businesses, ensuring more than half of employers see no increase or a cut in NIC bills. We are restoring economic and political stability to create conditions for growth.