Businesses Brace for Price Hikes Amid Rising Costs and Taxes

Rising Costs and Taxes Impacting Businesses

Increased National Insurance Contributions and Wages
In April, employer National Insurance Contributions (NICs) will rise from 13.8% to 15%, alongside a higher National Living Wage of £12.21 per hour.

The Pressure on Businesses:

Higher Operational Costs: Businesses like Denroy Group report these changes will cost them hundreds of thousands of pounds annually.
Reduced Hiring: Many companies, including manufacturers, are scaling back on hiring or even reducing headcount to manage costs.
Price Hikes Ahead: 55% of firms surveyed expect to pass costs onto consumers, up from 39% last quarter.

Business Confidence at a Two-Year Low

Confidence Slumps Amid Economic Uncertainty
The BCC’s survey shows that confidence among businesses has hit its lowest level since late 2022, with only 49% expecting sales growth this year.

Tax Concerns:

63% of businesses expressed worry about taxes, the highest level recorded since 2017.
Many firms feel the Budget measures disincentivize investment and growth.

Economic Outlook:

The UK economy experienced zero growth from July to September 2024, followed by a contraction in October.
While KPMG predicts a 1.7% growth rate for 2025, it warns of persistent inflation as businesses pass on rising costs.

Business Perspectives on the Budget

Mixed Reactions from Business Leaders
While some businesses express frustration over tax and wage changes, others remain optimistic about sector resilience.

Concerns:

Kevin McNamee, Denroy Group: “It’s hard to see how the Budget incentivizes businesses to grow. We’ve had our pockets picked.”
BCC’s Shevaun Haviland: Rising costs create a “pressure cooker” for businesses, limiting their ability to invest.

Optimism in Travel Sector:

Dame Irene Hays, Hays Travel: Despite cost pressures, bookings are up 22% this year, signaling confidence in the travel industry’s recovery.

Government Response to Business Concerns

Treasury Defends Budget Measures
The Treasury asserts that its Budget aims to stabilize the economy and reduce costs for many businesses.

Key Points from the Treasury:

More than half of businesses will see no increase or a reduction in NIC bills.
Measures aim to provide stability and encourage long-term growth.

Challenges Ahead:
Despite these assurances, businesses worry about balancing operational costs with the need to remain competitive in the market.

Conclusion

A Delicate Balancing Act for UK Businesses
As firms prepare to raise prices to offset increased taxes and wages, the pressure on consumers and the economy continues to grow. While some sectors remain resilient, others face tough decisions about staffing and investment, highlighting the challenges of navigating an uncertain economic landscape.