British companies plan price increases as budget pushes up costs

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The number of companies planning price increases in the coming months has risen sharply as UK budget increases in taxes and wage costs led to a “collapse in confidence”, the British Chambers of Commerce warned.

About 55 percent of companies said they plan to raise prices in the next three months, up from 39 percent in the third quarter, the lobby group’s survey of nearly 5,000 companies showed.

The expected price increases will raise concerns budget The measures will support robust inflation in the UK.

Concerns about tax levels also reached their highest level since 2017, according to the BCC, after Chancellor Rachel Reeves decided to increase employers’ national insurance contributions by £25 billion in the October Budget.

“Business confidence has plummeted in a pressure pot of rising costs and taxes,” said Shevaun Haviland, director general of the BCC. “Companies of all shapes and sizes tell us that increasing Social Security is particularly damaging.”

The government has failed heavy fire out of business since the draft budget as bosses complain about higher employers’ social security payments and increases in the national living wage. The weakened confidence was accompanied by weak GDP figures, the Bank of England said Estimates The economy was unable to grow in the final quarter of 2024 despite a strong start to the year.

The proportion of companies planning price increases was at a level last seen at the beginning of 2023, when official inflation was still over 10 percent.

Rising labor costs were the most common reason given by companies planning to raise prices. 75 percent of respondents raised the issue, up from 66 percent in the third quarter. The problem is most significant for the hospitality sector as well as transport and logistics, it said.

About 63 percent of businesses said taxes, including social security, were a problem under the budget proposal, the highest level since 2017. Confidence, meanwhile, has fallen to its lowest level since former Prime Minister Liz Truss’s mini-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 confidence lowest in retail and hospitality. Nearly a quarter of companies say they have cut their investment plans, up from 18 percent in the third quarter, although 56 percent say their plans remain unchanged.

The Bank of England opted to keep borrowing costs steady at 4.75 percent at its final meeting of 2024 as the central bank continues to monitor the budget’s impact on the inflation outlook. The majority of rate setters expressed concern that recent wage and price increases had “increased the risk of continued inflation.”

The BoE warned of “significant uncertainty about how the economy might respond to higher overall employment costs” and warned that “most indicators of short-term activity in the UK have declined”.

The meeting followed data that showed Inflation in the UK rose to 2.6 percent in November, up from 2.3 percent in October.

The BCC survey was conducted between November 11 and December 9 and collected data from more than 4,800 companies, more than 90 percent of which were small or medium-sized businesses.

“As costs rise, our survey paints a difficult picture and shows that companies are having to make some very difficult decisions,” said David Bharier, head of research at the BCC.

“Many are telling us they expect prices to rise and investment to scale back, and we expect this to result in weak to no economic growth.”

The Treasury said: “We have presented a one-off parliamentary budget to clear the air and give businesses the stability they so desperately need.”

It added: “This is just the start of our plan for change, which will unlock investment, build Britain back through planning reforms and deliver a modern industrial strategy to provide the security and stability businesses need to thrive in the growing and highly developed United Kingdom to invest. potential sectors.”